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Short Term Deposits - Features and Benefits Explained

December 21, 2024

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If you have a short-term financial goal to meet, investing in short-term fixed deposits could help. For instance, if you think you need funds after a year to meet a specific goal, you can book an FD from 7 days to 12 months, earn interest and withdraw cash upon maturity.

In this article, we have highlighted the key features and benefits of short-term deposits.

Understanding Short-Term Deposits

Short-term deposits are a type of bank deposit that typically have a maturity term ranging from 7 days to less than 12 months. These deposits offer a higher rate of return than regular savings accounts, making them an attractive option for those looking to earn more on their savings in a shorter span of time.

Benefits of Short-Term Deposits

Now, let's take a closer look at the benefits that short-term deposits offer:

Transitory Savings

Short-term deposits could be a great option if you have transitory savings. For example, if you're saving for a down payment on a house or planning a vacation in the near future, a short-term deposit can help you earn more on your savings while keeping your funds easily accessible.

Higher Returns than Savings Account

One of the primary advantages of short-term deposits is the higher rate of return they offer compared to regular savings accounts. By investing your money in a short-term deposit, you can make your savings work harder for you and earn more interest over time.

Loan Facility

Many short-term deposits allow you to avail loans against your deposit without requiring any additional documentation or a guarantor. This can be beneficial in times of financial need or when unforeseen expenses arise.

Key Features of Short-Term Deposits

Here are some characteristics of short-term deposits.

Nomination Facility

When you open a short-term deposit account, you have the option to nominate a beneficiary. This ensures that your loved ones will have access to the funds in case of any unfortunate event.

Security

Your deposit amount up to ₹5 lakh is insured under Deposit Insurance and Credit Guarantee Corporation (DIGCC).

Fixed-rate of Interest

The interest remains fixed throughout the deposit tenure. This ensured guaranteed or assured returns upon maturity irrespective of market conditions,

Auto-renewal Facility

Short-term fixed deposits are eligible for renewal, meaning if you don't withdraw the amount upon maturity, your deposit will get re-invested.

Types of Short-Term Deposits in India

Here are some of the types of short-term deposits in India

Fixed Deposits

Short-term fixed deposits offer higher interest rates than savings accounts and come with shorter deposit tenures.

Recurring Deposits

RDs allow you to save money in a disciplined way to meet short-term goals. However, the minimum deposit tenure is 6 months. You can withdraw amount before the maturity period, but you may lose out on the applicable interest rate.

Final Thoughts

Short-term deposits offer many advantages when it comes to liquidity and flexibility in managing your finances. They provide higher returns compared to regular savings accounts and allow you to access funds quickly when needed.

Looking to grow your savings? Ujjivan SFB offers a wide range of fixed deposit products. Select the FD of your choice and take a step forward to your financial goals. Alternatively, you can browse through Ujjivan SFB product suite - our wide range of financial products are designed to make your financial life better.

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FAQs

1. What are short-term deposits?

Short-term deposits are financial instruments that lets you deposit money for a relatively short period, typically between 7 days to 1 year, and earn interest on the deposited amount.

2. What are the common types of short-term deposits in India?

Common types of short-term deposits include fixed deposits, recurring deposits, (both with short tenures), and certificates of deposits.

3. What are the major benefits of short-term deposits?

The primary benefit of short-term deposits is the liquidity they offer. You can withdraw the amount whenever you want to with the interest. You also get a high rate of interest that lets your money grow and can take a loan against the deposited amount. The money you deposit is completely safe.

4. What documents are required to open short-term deposits in India?

Generally you have to present identity proof in the form of Aadhar card or PAN card.

5. Are short-term deposits taxable?

Yes, the interest you earn on the amount is taxed as per your income tax slab.

Disclaimer

Short Term Deposits - Features and Benefits Explained

Understanding Short-Term Deposits