FAQs: Fixed Deposit

Who is eligible to apply for a fixed deposit account?

Any individual or institution is eligible to apply for the account.

How do I apply for an FD account?

You can get a bank FD at any bank.
You have to open an FD account with the bank to make the deposit. Some banks may also insist that you maintain a savings account with them to operate an FD account. When you open the FD account, you are issued a deposit receipt or an account statement.
This statement can be updated, depending on the duration of the FD and the frequency of interest calculation. Make sure you check deposit receipts carefully to see that all particulars have been properly and accurately filled in.

Home work before buying Fixed Deposits

Here are a few pointers that will help you to select the right deposit schemes:

Credit ratings: It is a very important indicator. CRISIL and ICRA are India's leading credit rating and research institutes. They do a detailed research of the company and then rate them. AAA rating denotes the highest safety. It indicates the financial health of the company and the ability to service its financial obligations.
The higher the rating, higher is the safety.
FAAA and LAAA/MAAA are the highest ratings.
Ratings below LAA/MAA or FAA (that is FBBB or below) should be avoided.

Rate of return:

Again any company offering a very high rate of interest should be a cause for concern. Companies generally offer high rate of interest to make up for the perceived risk attached with their offerings. So again don't get carried away with high rate of interest (above 12%) as they always come with high risk.

Promoter credibility:

Promoters play a substantial role in making or breaking a company. So always do a background check on them. Promoters with dubious or shaky records should be strictly avoided. Doing a background check on promoters is easier said than done so the safer route is to invest in fixed deposits of a blue-chip company.

Past records:

Although past performances are generally not considered a very good indicator of the future of a company one should not completely avoid it. Any investor must check the past payment history of the company. Also check the investor service standards of the company.