Have you heard of a “flexi fixed deposit”? Fixed deposits have long been a preferred choice for Indian savers because they preserve capital and offer dependable returns. A flexi fixed deposit blends the safety of a traditional FD with the flexibility of a savings account, making it easy to build a customised savings plan that aligns with your financial goals.
A flexi fixed deposit combines the disciplined returns of a fixed deposit with the liquidity of a savings account. Read on to understand how it works and whether it suits your needs.
What is a Flexi Deposit?
A flexi fixed deposit is a hybrid product that gives you the higher interest potential of an FD while keeping funds more accessible like a savings account. Your FD is linked to your savings or current account so that funds can move between the two according to predetermined rules set by the bank.
Unlike a standard FD, where the money is locked for the chosen tenure, a flexi FD allows partial withdrawals subject to the issuer’s terms and limits. Because of this added convenience, the interest rates on flexi FDs are usually lower than those on conventional fixed deposits. You can also set a threshold: when your linked account balance exceeds that limit, excess funds are swept into the FD; when it falls below the limit, money is transferred back from the FD to your account.
The exact features, withdrawal frequency, and interest computation vary across institutions, so check the bank’s policy before investing.
Features of Flexi Fixed Deposit
Key characteristics that make a flexi fixed deposit attractive:
- Double benefits
You benefit from the ready access of a bank account while earning interest higher than standard savings account rates. This makes the product useful for savers who want liquidity without entirely sacrificing returns.
- Partially withdrawable funds
Flexi FDs typically allow partial withdrawals according to the bank’s specified frequency and limits. You may not be able to withdraw the entire principal without incurring penalties, but the partial withdrawal option offers useful flexibility.
- Quarterly or yearly interest
Interest on flexi FDs is generally paid or compounded at regular intervals (quarterly, half-yearly, or yearly) depending on the bank. Regular interest payouts can help generate steady income.
- Choice of principal and tenure
You decide how much to invest and for how long, allowing you to structure the FD to meet specific goals or cash-flow needs.
- Loan facility and auto-renewal
Like regular fixed deposits, flexi FDs can often be pledged as collateral for loans. Many banks also offer auto-renewal at maturity, helping you stay invested without manual intervention.
Flexi Fixed Deposit Interest Rates
Flexi fixed deposits provide predictable returns and are offered by major banks. Below is an illustrative comparison of schemes and typical rates (rates may change and vary by bank and customer category):
| Name of Bank’s Scheme | Applied Interest Rate | Flexible Investment Tenure | Minimum Investment Amount |
|---|---|---|---|
| Axis Bank Auto Fixed Deposit | Up to 7.75% p.a. | 6 months to 5 years | ₹5,000 |
| BOB Suvidha Flexible Fixed Deposit Scheme | Up to 7.65% p.a. | 12 months to 5 years | ₹5,000 |
| e-SBI Flexi Deposit | Up to 7.50% p.a. | 5 years to 7 years | ₹5,000 |
| DBS Bank Flexi Deposit | Up to 7.50% p.a. | 374 days | ₹10,000 |
| RBL Bank Flexi Sure Fixed Deposit | Up to 8.85% p.a. | 7 days to 10 years | ₹5,000 |
Advantages and Disadvantages of Flexi Fixed Deposit
Consider these pros and cons when deciding if a flexi fixed deposit fits your financial plan:
| Advantages of Flexi Fixed Deposit | Disadvantages of Flexi Fixed Deposit |
|---|---|
| Flexible investment amounts Higher liquidity than a regular FD Auto-renewal and loan against FD available |
Interest rates are typically lower than regular FDs Premature or excessive withdrawals can attract penalties May be less suitable for long-term, locked-in goals that seek maximum returns |
Weigh your need for liquidity against the slightly lower returns compared with standard fixed deposits to determine if a flexi FD aligns with your objectives.
FAQs on Flexi Fixed Deposit
Can I withdraw money partially from a Flexi Fixed Deposit?
Yes. Most flexi fixed deposit schemes permit partial withdrawals according to the bank’s specified limits and frequency.
What are the tax implications of investing in a Flexi Fixed Deposit?
Interest earned on flexi FDs is taxable according to your income tax slab. Banks may deduct TDS if interest exceeds the prescribed threshold for regular or senior citizens, so check current limits and regulations.
Can I link my savings account with a Flexi Fixed Deposit?
Yes. Linking a savings or current account to the FD is fundamental to how a flexi fixed deposit operates, allowing automatic sweeps between the accounts based on the set thresholds.