A flexi fixed deposit is a variant of traditional fixed deposit (FD) scheme — a popular investment option among Indian investors to earn a regular interest income. Most Indian banks offer flexi-deposit saving option and lately, it has been growing in popularity. As the name suggests, flexi-fixed deposit offers flexibility to customers. It offers a combination of features of fixed deposit and savings account.
Let’s look at the basic characteristics of a flexi-FD.
Easy to open
Opening a flexi-fixed deposit account is fairly simple. The procedure generally requires filling a few forms in the bank with your current/savings account and submitting some documents to validate details. The applicant is assisted by a bank executive throughout the process.
Better returns and liquidity
Individuals can select a tenure and investment amount for which he/she would like to make the deposit. This scheme allows the investor to withdraw money before the maturity period from their savings/current account.
If the balance in the bank account is above the predetermined limit it is automatically “swept in” to the FD to earn extra interest. In case the balance is below the limit, the amount will be “swept out” from the limit to meet the gap and the rest of the funds in the FD continue to earn interest. In this way, the Flexi FD offers more liquidity than the traditional alternative.
Higher interest than savings account but important to use efficiently
Flexi fixed deposit (FD) offers a higher rate of interest than savings accounts. However, it is important to use this scheme efficiently to get higher returns. If there are frequent withdrawals from your account then your FD might have to be liquidated to cover the withdrawals from the account and you may lose out on interest.
Flexi fixed deposit is a viable option for earning interest over surplus income. According to experts, this scheme is best suited for secondary accounts where there are only a few withdrawals. Not only does this option offer flexibility but it is also a feasible option for individuals who prefer liquidity.