A fixed deposit (FD) is a financial instrument provided by banks which provides investors with a higher rate of interest than a regular savings account, until the given maturity date. The defining criteria for a fixed deposit are that the money cannot be withdrawn from the FD as compared to a recurring deposit or a demand deposit before maturity. The tenure of an FD can vary from 7, 15 or 45 days to 1.5 years and can be as high as 10 years.
Usually in India the interest on FDs is paid every three months from the date of the deposit. (E.g. if FD a/c was opened on 15th Feb., first interest instalment would be paid on 15 May). The interest is credited to the customers' Savings bank account or sent to them by cheque. This is a Simple FD. The customer may choose to have the interest reinvested in the FD account. In this case, the deposit is called the Cumulative FD or compound interest FD. For such deposits, the interest is paid with the invested amount on maturity of the deposit at the end of the term.
Banks issue a separate receipt for every FD because each deposit is treated as a distinct contract. This receipt is known as the Fixed Deposit Receipt (FDR) that has to be surrendered to the bank at the time of renewal or encashment