Know about Flexi Fixed Deposit in India

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Flexi Fixed Deposit

We often try to mix the features of different products in the hope of getting something better. This is mainly because we want everything to be unique. We often think a lot about these ideas, and practically implementing them. When done, there might be two possible results – it does not work as you would have hoped or it gives birth to a unique element.

When we put that experiment into the financial world of investing, the flexi fixed deposit is something which was tried by the Financial Institutions, and it turned out to be a unique element. It helped to make the fixed deposit investment more flexible.

So, what is a Flexi Fixed Deposit?

By the name itself, one can make out that it is a form of fixed deposit which offers flexibility. A flexi deposit is a combination of fixed deposit and savings/recurring account. A flexi Fixed Deposit helps the customers to get a higher rate of interest along with liquidity.

  • Fixed Deposit + Savings Account = Flexi Fixed Deposit

(Higher interest + liquidity = Flexi Fixed Deposit)

How does a Flexi Fixed Deposit Help?

A flexi account will help you meet the regular cash needs. FDs offer minimal liquidity and savings account come with a lower interest rate. A flexi account helps you to get a higher interest rate along with the provision of cash to meet your regular needs. In a flexi deposit, you can use the required cash and then set the limits following it up by transferring the remaining amount to your deposit to avail a higher rate of interest.

For instance, in a flexi account if you deposit an amount of INR 1 lakh for a years’ time, around INR 70,000 will help you earn INR 3,500 per year with an interest rate of 5%. Rest INR 30,000 will remain in your savings account which will help you earn 3.5% per year along with offering liquidity. Thus, you can use this amount to meet your daily expenses.

How does Flexi Fixed Deposit Work?

To make it simple, flexi fixed deposit helps you to withdraw funds at the time of your need. Initially, you can begin a fixed deposit account with a budget of INR 25,000 - INR 50,000 for a particular tenure.

Flexi Fixed Deposit is quite beneficial when you require money, and your savings account does not have sufficient fund. In such a case, your financial institution will withdraw the necessary amount from your flexi deposit and will transfer it to your savings account so you can fulfil your needs. However, it is important to know that policy of every financial institution differs.

Types of Flexi Fixed Deposit Accounts:

There are various types of flexi deposits which banks offer. However, they are broadly classified into a flexi fixed deposit account and sweep account.

A sweep account is opposite of flexi fixed deposit. In flexi fixed deposit where funds get transferred from fixed deposit to savings, under sweep account, funds above the minimum limit are automatically transferred to your fixed deposit account.

Having understood the basics, let us understand when you should invest in a flexi fixed deposit.

  • Earning on idle money

  • Higher interest on savings

  • Seeking Liquidity

  • Seeking Flexibility

If the points above are something, you are expecting from your fixed deposit. A Flexi Fixed Deposit is the best option for you. There are highly rated Non-Banking Financial Companies (NBFCs) which offer a higher interest rate on FD and are much flexible than banks.