Find out the minimum FD period for domestic and NRI Fixed Deposits
A Fixed Deposit (FD) yields higher interest than a Regular Savings Account. Once invested, you can forget about your investment until maturity. You can create an FD account anywhere, anytime, via mobile and internet banking. Fixed Deposits come with certain minimum investment periods. This article explains the minimum period for an FD based on its type.
The Minimum FD period depends on the type of deposit, which could be:
The minimum FD period of deposit for Domestic Fixed Deposit is 7 days. This duration, although small, can create significantly higher interest income on high-value FD amounts exceeding INR 15 lakhs. Interest on Domestic FDs is paid in INR.
Non-Resident Indians can open Non-Resident Ordinary or NRO FDs from funds parked in their NRO Accounts. An NRO FD is also predominantly treated like a domestic FD, and the interest rates, currency of interest payment, and investment durations are the same. Thus, the NRO Fixed Deposit minimum period is also 7 days.
Unlike domestic and NRO FDs with significantly low minimum deposit periods, the NRE Fixed Deposit minimum period is 1 year. Thus, it is higher than those offered on domestic and NRO FDs of the lowest investment duration. You can also open long-term NRE FD accounts with durations lasting up to 10 years.
NRIs who wish to create Fixed Deposits from their foreign currency earnings can open Foreign Currency Non-Resident (FCNR) deposits. Like NRE FDs, the Fixed Deposit minimum period for FCNR FDs is 1 year. However, unlike all the other FDs mentioned above, banks pay interest in the currency of deposit, not INR.
You can opt for premature withdrawals regardless of the type of FD you open and the minimum time period for FD. However, you have to pay a penalty. The bank typically mentions the penalty amount at the time of the Fixed Deposit account opening. Furthermore, banks are not liable to pay any interest if you withdraw the deposit before the minimum maturity period.
NRIs returning to India and looking for premature closure of NRE Fixed Deposits can evade the penalty by converting the NRE FD to a Resident Foreign Currency (RFC) Account. On such FDs, the RFC FD interest rates will be applicable for premature withdrawals within the FD minimum period of 1 year. Also, NRIs should make such requests immediately upon returning to India. Banks may levy a penalty if you convert your NRE FD to an FCNR (B) Deposit before it has run its minimum maturity period course.
With FDs, you can place your idle cash in high-interest-generating accounts. You may make premature withdrawals but have to forfeit the potential interest earned. It would help if you held the FD until maturity to get the best value out of it.
If you prefer to save time and effort, and open an FD account remotely, then download DBS Bank app right away!
*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.