How to open and choose a fixed deposit

You can open a fixed deposit (FD) online through your bank or an investment app, or at a branch. The bank first checks who you are (KYC) and asks for your PAN. Before you look at the rate, check who takes your money and how long it is locked. Then check how the interest is paid and what breaking the FD early costs.

How do you open a fixed deposit?

You can open one online, through your bank's net banking or app or an investment app that offers FDs, or at a branch.

Whichever route you pick, the bank must first complete your KYC. That stands for "know your customer": the bank checks your identity and address against official documents.

Two things are settled on the application itself:

• Maturity instruction. RBI says the bank should take your instruction for what happens on the maturity date, in the application form itself. The choices are to renew the principal and interest, renew only the principal and have the interest paid out, or have everything paid out. Our article on auto-renewal of fixed deposits goes through them.
• Nominee. A nominee is the person you name to collect the money from the bank if you die, who holds it for your legal heirs. Since 1 November 2025 you can name up to four. Nomination is optional, and RBI's rules say a bank must not refuse or delay opening an account only because you decline to nominate. How a nominee claims an FD is covered in its own article.

Koshex offers fixed deposits, both bank and corporate, from ₹10,000. Only the bank deposits are insured, up to ₹5 lakh per depositor per bank. You can see them on the fixed deposit page.

Who can open an FD, and what do you need?

Any individual who completes KYC can open an FD alone or jointly with others. A parent or legal guardian can also open one in a child's name.

For KYC, RBI's rules ask a bank to obtain one of these:

• your Aadhaar number, where you offer it or are getting a government benefit through it;
• proof that you hold Aadhaar, or another officially valid document (OVD) such as a passport, driving licence, voter ID, NREGA job card or National Population Register letter;
• your KYC Identifier, with your consent for the bank to download your record from the central KYC registry.

On top of that, the bank takes your PAN, or a declaration in its place if you have none. PAN is your Permanent Account Number, your tax ID.

Is PAN mandatory for an FD?

PAN must be quoted for a bank FD of more than ₹50,000. It is also needed once your deposits add up to more than ₹5 lakh in a financial year.

TDS, which is tax the bank deducts before the interest reaches you, is then cut at 20% or more if any is deducted. Form 121 is a declaration you give a bank so it does not deduct TDS. You can use it if the tax on your whole year's income will be nil. If you are under 60, the income you declare on it must also be below the tax-free limit. Without a valid PAN, a Form 121 is invalid. Our article on tax on fixed deposits has the TDS limits.

Can a child or two people hold an FD?

A guardian acts for the child, who is a minor in law. A bank may let a child aged 10 or more run the FD alone, within limits it sets. Fixed deposits for children covers what changes at 18.

For joint holders, RBI defines two modes. With "Either or Survivor", both signatures are not needed for the maturity proceeds, though they may be needed before maturity. With "Former or Survivor", the first-named holder alone withdraws the matured amount while both are alive.

What should you compare beyond the interest rate?

Who takes your money matters more than a fraction of a percent. A bank FD is insured up to ₹5 lakh per depositor per bank. A company FD is not insured at all.

The insurer is DICGC, the Deposit Insurance and Credit Guarantee Corporation. It covers principal and interest together, for deposits held in the same right and capacity. Its list of insured banks, as of 29 September 2026, includes small finance banks and payments banks. NBFCs, which are non-bank finance companies, have no such cover.

Rates. From 1 October 2026 a bank must pay rates strictly as per the schedule disclosed in advance on its website. It cannot negotiate the rate with you. A bank may vary it only by tenure, by deposit size (₹3 crore and above) and by whether the FD lets you withdraw early. It may also run higher-rate schemes for resident senior citizens.

Breaking early. For an individual's FD of up to ₹1 crore, RBI requires the bank to let you close it early. Interest is paid at the rate for the period the money actually stayed. A penalty, which is a cut in that rate, applies only if the bank discloses one. At SBI the cut is 0.50% up to ₹5 lakh and 1% above that, below ₹2 crore. It comes off the rate in force when the deposit was made. An NBFC deposit has a three-month lock-in under RBI's rules, and our corporate FD article covers what to check before booking one. See also how to avoid a penalty on premature withdrawal.

Company deposits. RBI says an NBFC needs at least BBB- from a SEBI-registered agency, renewed each year. An NBFC must also be registered with RBI and have "specific authorization to accept deposits from the public".

How do you pick the tenure and payout?

Start from the date you need the money and choose a tenure that ends on or before it. Then choose a payout that matches whether you need income now.

Say a 27-year-old needs ₹3,20,000 for a wedding two years from now. Assume a rate of 7% a year. This is an assumption for the example, not a quoted rate.

• A 2-year cumulative FD grows to ₹3,66,368, using yearly compounding as our fixed deposit calculator does.- A 2-year FD with yearly payout pays ₹22,400 a year, ₹44,800 in all, and returns the ₹3,20,000 at the end.
• A 3-year FD would end after the wedding. Breaking it early pays the lower rate for the two years it ran, minus any penalty the bank has disclosed.

A longer tenure is not always a higher rate. SBI's card effective 15 December 2025 showed 6.25% for 1 year to under 2 years and 6.40% for 2 to under 3 years.

At SBI, interest is paid quarterly by default. Monthly payout needs an FD of 12 months or more and comes on a discounted rate. The cumulative option starts from 6 months and compounds quarterly. Monthly interest on fixed deposits explains the trade-off.

A floating-rate FD, which RBI says must be tied to a transparent, market-determined external benchmark, is a different product from a fixed-rate one. Ask which you are getting.

If you want to save tax, a tax-saving FD runs five years. It qualifies for a deduction under section 123 (the old Section 80C), under the old tax regime only. You cannot take the money out before five years, except a nominee after your death. The interest is taxable. Tax-saving fixed deposits has the detail, and Koshex also offers them.

Should you put all your FD money in one place?

Not if your total at one bank would pass the ₹5 lakh cover. Count every branch of the bank together, count both principal and interest, and count your other deposits there.

Suppose the same person already keeps ₹2,25,000 in a savings account at the bank where the ₹3,20,000 FD goes. The two together come to ₹5,45,000 before any interest. That is above the ₹5 lakh cover at that bank. Deposits at a different bank are covered separately.

Laddering means splitting one sum into several FDs that mature in different years. Why diversification matters in fixed deposits covers laddering and spreading FDs across banks.