For that we have to understand that there are two parties involved here. One is the bank and the other is the customer. Banks need money, which they lend to borrowers from whom they charge interest. Banks obtain that money from its customers mainly through various accounts – current account, savings account etc.

One way of obtaining that money is through fixed deposits for which they offer certain rates of interest. The funds that they get is lent to borrowers for a slightly higher rate of interest. The difference between the interest rate on FDs and on loans is called the spread, which is the bank’s earnings.

If you have some spare cash and want to invest in fixed deposits, there are many options available for you. You can deposit money for periods ranging from a few days to a few years. Of course, the interest rates for shorter periods will be lower than those offered on fixed deposits of longer maturities. For example, if you want an FD for 30 days, the interest rate could be around 6 percent. If the deposit is for a year, the interest rate could be 7 percent.

The interest rates charged by different banks vary, so you might have to do a comparison to find the best rate. However, differences tend to be small. Smaller banks, like cooperative banks, may offer higher rates of interest than the large banks. However, you must remember that there is a direct correlation between risk and returns. High interest rates will always mean a higher level of risk.

Whether or not you choose to invest in a fixed deposit depends on how much returns you are satisfied with, and the amount of risk you are prepared to bear. Generally, returns on fixed deposits are lower than other investment avenues like equity, but the risks too are lower.

• • An individual in his own name.
• • More than one individual in joint name.
• • Minor of age 10 and above on terms laid down by the bank. Accounts can also be opened in the name of minor with their father/mother, as guardian.
• • Clubs, associations, Educational Institutions, Partnerships and joint stock companies, provided they are registered, and bank is satisfied that the account is opened for genuine savings purpose.

• • The passport
• • The driving licence
• • Proof of possession of Aadhaar number
• • The Voter's Identity Card issued by the Election Commission of India
• • Job card issued by NREGA duly signed by an officer of the State Government
• • Letter issued by the National Population Register containing details of name and address