The Evolution of Fixed Deposits: Modern Approaches to a Classic Investment

For the risk-averse investor in India, fixed deposits (FD) are one of the most preferred investment options. In 2017-18, the RBI reported that FDs constituted more than half of the banking deposits.

Not only do they offer certain returns, but fixed deposits have also played a key role in the financial inclusion of Indians. During lockdowns that were initiated to stop the spread of the Coronavirus pandemic, Axis Bank and DCB Bank offered contactless fixed deposits in India.

Since then, many banks and financial institutions have begun to offer digital solutions to invest in an FD. Read on to learn more about the evolution of FDs into digitally-enabled investment avenues.

Evolution of Digitised Fixed Deposits

With digitisation modifying every aspect of finance in India, traditional FD investments also underwent a transformation. Even before the pandemic, Axis Bank was one of the early entities to launch a digital fixed deposit.

As India’s third-largest private sector bank, Axis Bank’s digital FDs gave a large group of customers the freedom to park their surplus funds hassle-free. All it takes is just 3 minutes to open this digital FD.

What’s even more amazing is that you can open this digital FD even if you do not hold a savings account in the bank. The launch of an Express FD with attractive interest rates proved a convenient option for customers to save money and meet their financial goals.

But that’s not all. The pandemic further bolstered this trend as many reputed financial institutions began offering digital investment solutions for FDs. For instance, you can easily open a fixed deposit account online when you opt for a Mahindra Finance FD, Bajaj Finance FD and more.

For instance, you can start a Mahindra Finance FD from the comfort of your home with a small investment of just ₹5,000. One of its products, the Dhanvruddhi Cumulative scheme, has been primarily designed for online investors.

This scheme offers attractive interest rates of 7.90% p.a. and 8.05% p.a. for tenors of 30 and 42 months, respectively. While these rates apply to non-senior investors, senior citizens can enjoy an additional 0.25% interest p.a. on their invested amount.

That said, while providing the convenience of beginning an FD investment from the comfort of your home, digital FDs also offer:

● Instant remote onboarding
● e-KYC
● Customised customer experience

With remote onboarding, customers are guided on how to book a fixed deposit from their laptop or smartphone, no matter where they are. They no longer need to visit a branch and wait in long queues to enquire or book a fixed deposit.

Furthermore, e-KYC inclusion has simplified the application process. You can simply upload your KYC documents on the issuer’s website to book a fixed deposit within minutes. This customised experience helps customers not to book an FD effortlessly, but also compute their FD earnings well in advance.

Most FD issuers provide fixed deposit calculators on their websites, helping investors assess their returns across a specific tenor. All you need to do is enter the amount you plan to invest, the FD interest rate, and the investment timeline to get results instantly.

However, certain inherent pain points have challenged financial institutions while modernising traditional fixed deposit investment. This was due to the following reasons,

● Most conventional banks in India relied on outdated technology that hindered the quick adoption of cutting-edge financial technologies in banking operations
● There was an absence of a single-window wherein customers could compare and invest in different schemes
● The FD process, including application and redemption, was quite tedious for the customers as it involved multiple process integrations

Features and Benefits of Digital Fixed Deposits

When it comes to interest rates, there is a very slight, if any, difference between digital and regular fixed deposits. Some issuers offer high FD rates on digital deposits to attract investors. However, when it comes to convenience and ease of operation, the former scores much higher than regular FDs.

Here are some of the benefits that you can enjoy by opting for a digital fixed deposit:
● Instant Application Process: Digital fixed deposits allow instant onboarding, as you can complete the process within minutes
● Minimal Documentation: Most banks and NBFCs require only basic documentation like PAN and Aadhaar cards to be submitted, making the entire process simple
● Waiver on Pre-withdrawal Fee: Some banks do not levy a penalty if you withdraw your digital FD account prematurely

However, you must enquire about the waiver with the FD issuer before booking a fixed deposit as this depends entirely on the issuer.

Benefits of a Digital FD Booking Platform

Digital FD platforms allow you to save time, effort, and money while increasing the convenience of investing in fixed deposits. That said, these digital platforms enable much more than that.

By providing information about different FD schemes available at your disposal online, digital FD platforms let you compare different issuers and types of FDs. This way, you can choose the FD scheme that offers the highest interest rates with minimum effort.

These platforms also provide a personalised experience to fixed deposit customers. You can choose various tenor options and the corresponding interest rates. This helps you be better informed and make smarter decisions.

To sum up, the process of opening a digital FD account is quite convenient and does not require you to step out of the comfort of your home. You simply need to visit the product page on the official website or app of the bank or issuer and fill in the short application form.

Then, you will only be required to attach the relevant documentation and complete an e-KYC verification process to get your account opened. For instance, you need to submit an Aadhaar or PAN card, voter ID, or passport to book a Mahindra Finance FD online.

Choose the e-FD amount you wish to deposit and its tenor to begin your investment. This way, you can book a digital FD effortlessly with most FD issuers across the country.

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