Managing excess money wisely is very crucial. While savings accounts are a common choice, time deposit accounts offer an attractive alternative for many people. A time deposit (or a term deposit) is a bank account where a customer deposits a lump sum of money for a fixed period. They are commonly used for mid- to long-term savings goals.
Key Takeaways
- A time deposit offers a higher interest than a savings account.
- Time deposits are a low-risk, stable way to grow money over time.
- Banks use deposited funds for lending or investments, earning a margin.
- Withdrawing funds from a time deposit before maturity may lead to penalties and loss of interest.
How is a Time Deposit Different From a Savings Account?
A time deposit is a fixed-term investment where funds are locked in for a specific period. However, a savings account provides flexibility and easy access to funds at any time. Here is a full list of differences between the two:
| Feature | Time Deposit | Savings Account |
| Purpose | Long-term saving/investment | Short-term savings and daily transactions |
| Interest Rate | Higher than savings accounts | Lower than time deposits |
| Flexibility | Low – funds are committed | High – funds are liquid |
| Withdrawal Penalty | Yes, if withdrawn before maturity | No penalty for withdrawals |
| Ideal For | Planned savings with no immediate need for cash | Emergency funds or daily banking needs |
Benefits of Time Deposit for Investors
Time deposits offer several benefits for investors seeking stability and predictable returns. They provide higher interest rates compared to regular savings accounts, making them a better option for growing funds over a fixed tenure. Since the returns are guaranteed and not subject to market fluctuations, they are considered low-risk and ideal for conservative investors.
Why DoBanks Offer Time Deposit?
Time deposits not only benefit customers but are also valuable for banks. Here’s why:
- Stable Cash Flow: Banks use the funds from time deposits to maintain a steady cash flow, which they use to provide loans to other customers.
- Interest Margin: Banks earn a profit by lending these funds at a higher interest rate than they pay to time deposit holders.
- Investment Opportunities: Banks may also invest these funds in other financial instruments or securities that yield a better return.
How to Open a Time Deposit Account?
Offline
- Visit a Bank or NBFC:You can visit your preferred bank branch or Non-Banking Financial Company (NBFC).
- Submit Documents:Fill out the application form and submit essential documents like your PAN Card and Aadhaar Card.
- Deposit money - You’ll need to deposit the required amount as per the chosen scheme either in cash, cheque, or through online transfer. The bank/NBFC will provide a receipt or acknowledgement confirming your investment.
Online
- Online Option: Most banks also offer online services. Visit the bank’s official website, select the time deposit option, and fill in the required details, such as deposit amount and tenure.
- e-KYC Verification: Complete the electronic Know Your Customer (e-KYC) process. Your identity will be verified based on submitted documents.
- Deposit Funds:Once verified, you can transfer the lump-sum amount using net banking, UPI, RTGS, or NEFT.
Conclusion
Time deposit accounts serve as a reliable savings option for individuals seeking fixed, risk-free returns over a specified tenure. While they lack the liquidity of savings accounts, they compensate with higher interest rates and stability. For banks, they offer a dependable funding source to fuel lending and investment activities. Whether you're saving for a goal or simply want your money to grow safely, time deposits are worth considering.