Short-Term Fixed Deposits

What are Short-term FDs?

A short-term fixed deposit refers to a financial facility in which investors put in a certain amount of money as a lump sum with a bank or an NBFC in exchange for a fixed rate of interest. The maturity periods of these deposits usually range from 7 days to 1 year. Depending on the bank and the period one chooses, the FD interest rates are usually 2.75% to 6.50% p.a. for general citizens and 3.00% to 7.00% p.a. for senior citizens.

Compared to long-term fixed deposits, short-term FDs are more liquid and flexible and thus offer investors the option of accessing the money earlier and still getting better returns in comparison with the savings account. The interest rates are, however, lower than the rates charged on long-term fixed deposits because of the minimal investment period.

Short-term FD Rates Across Leading Banks

Interest rates on short-term FDs vary across banks, depending on the deposit amount and the customer category. Generally, senior citizens get slightly higher FD interest rates compared to general customers.

*Short-term FD rates w.e.f Feb 2026

HDFC Bank Short-term FD

The bank provides short-term fixed deposits and assured returns. HDFC Bank short-term FD offers 2.75% to 6.25% interest rates to general citizens and 3.25% to 6.75% interest rates to senior citizens, which ensures flexibility and low-risk savings.

ICICI Bank Short-term FD

ICICI Bank assures flexibility in terms of fixed deposits with guaranteed returns. ICICI Bank short-term FD offers rates ranging from 2.75% to 6.25% for general citizens and 3.25% to 6.75% for senior citizens, and offers convenient net banking or mobile banking.

Union Bank of India Short-term FD

Union Bank provides a short-term fixed deposit with safe and stable returns that offer better earnings than normal savings accounts. Union Bank short-term FD rates range from 2.75% to 6.30% for the general citizen and 3.25% to 6.80% for senior citizens, which makes it suitable to invest over a shorter span of time.

Indian Bank Short-term FD

The Indian Bank short-term FD comes with interest rates of 2.80% to 6.10% for general customers and 3.30% to 6.60% for senior citizens. The bank offers stable and higher returns as compared to a savings account on their short-term fixed deposits that have a tenure of between 7 days to 1 year. 

UCO Bank Short-term FD

UCO Bank offers competitive fixed deposit interest rates on short-term deposits that are secure and flexible, and therefore make it a good investment. UCO Bank short-term FD offers interest rates of 2.90% to 6.10% for general citizens and 3.15% to 6.35% for senior citizens and guarantees stable and assured returns.

Axis Bank Short-term FD

Axis Bank provides short-term fixed deposits with high returns and the option of varying tenures. Axis Bank short-term FD offers interest between 3.00% and 6.25% for general citizens, with senior citizens being charged between 3.50% and 6.75%, assuring safe and consistent returns on short-term investments.

IDFC Bank Short-term FD

IDFC First Bank has fixed returns on short-term deposits that have a range of tenures between 7 days and 1 year. The interest rates on the IDFC First Bank short-term FD range between 3.00% to 6.30% for general citizens and higher rates, such as 3.50% to 6.80% for senior citizens, accompanied by flexibility such as the option to withdraw funds prematurely.

Punjab National Bank Short-term FD

Punjab National Bank gives short-term fixed deposits of 7 days to 1 year, which is a safe and convenient investment. The rates of interest offered by the PNB short-term FD range between 3.00% to 6.10% for general citizens and 3.50% to 6.60% for senior citizens.

State Bank of India Short-term FD

State Bank of India short-term fixed deposits start with a minimum deposit amount of ₹1,000 and payment of interest at the end of the quarter or after maturity. SBI short-term FD interest rate ranges from 3.05% - 6.25% for general citizens and 3.55% - 6.75% for senior citizens. 

Bank of Baroda Short-term FD

Bank of Baroda offers short-term fixed deposits between 7 days and 1 year with higher returns than savings accounts. The Bank of Baroda short-term FD has an interest rate ranging between 3.50% to 6.10% for general citizens and 4.00% to 6.60% for senior citizens, with features such as the auto-renewal of the FDs, FD loans, and a minimum deposit of ₹1,000.

Advantages of Short-term FDs

Short-term fixed deposits have a number of benefits that make them an appealing investment option.

• Capital Safety: Short-term FDs involve guaranteed returns, and they secure the principal amount, hence are a safe investment choice among risk-averse investors.
• Quick Liquidity: These deposits are convenient when people need to finance their short-term requirements because these tenures are short and allow investors to acquire those funds within a short time.
• Higher Returns than Savings Accounts: Short-term FDs usually come with better interest rates in comparison to the regular savings accounts, and they enable investors to get better returns on idle money.
• Reinvestment Opportunity: The investors have the opportunity to reinvest the maturity amount, depending on the current interest rates or changing financial requirements, to improve their financial plans.
• Easy Availability: Customers have an easy way of opening accounts with minimum documentation requirements, and thus, short-term FDs are easily accessible to the majority of investors.
• Nomination facility: Investors can appoint a nominee to ensure a secure and smooth transfer of funds in case of unforeseen circumstances.

Short-term FD vs Other Short-term Investment Options

Short-term FDs are considered one of the safest ways of investing money on a short-term basis, but there are other ways of investing that can be used to achieve the same objectives. Some of the common substitutes are the following:

• Savings accounts: These are very liquid savings accounts that can be used in carrying out day-to-day transactions, but yield lower returns compared to short-term FDs.
• Liquid mutual funds: It is an investments that are highly liquid and offer higher returns than FDs, but the returns are market-related and not guaranteed.
• Recurring deposits: RDs promote saving in a disciplined manner because they involve depositing every month, and their returns are predetermined, but the deposited amount is not withdrawn until maturity.

Eligibility Criteria for Short-term FDs

Short-term FDs are accessible to a wide range of investors. Common eligibility requirements include:

• Resident individuals
• Senior citizens
• Minors (through guardians)
• Hindu Undivided Families (HUFs)
• Companies and partnership firms
• Trusts and institutions
• Non-resident Indians (subject to bank policies)

How to Avail Short-term FDs?

Banks and other NBFCs provide investors with the opportunity to open short-term FDs either online or offline.

Online Application Process

It is easy to open a short-term FD online by following these steps:

• Visit Website/App: Visit the official site or mobile app of the bank or the NBFC.
• Log in/Register: Register or log in using net banking.
• Choose FD Option: Select a preferred tenure for the FD.
• Enter Details: Enter the information of the investment amount and nominee.
• Confirm Payment: Check information and make payment.
• Get Confirmation: Receive the FD booking confirmation.

Offline Application Process

Follow the steps below to open a short-term FD using the offline procedure:

• Visit Branch: Go to the nearest bank branch or NBFC office.
• Request Application Form: Request the fixed deposit application form.
• Fill Application: Fill in the form with the necessary information.
• Submit KYC Documents: Provide Identity and address documents.
• Deposit Funds: Pay using a cheque, cash, or transfer.
• Receive FD Receipt: Get the FD certificate or FD receipt when they are processed.

Tax Implications on Short-term FDs

Interest earned on short-term fixed deposits is taxable at the prevailing income tax slab of the investor. In case the total of the interest earnings surpasses ₹50,000 for general citizens and ₹1,00,000 for senior citizens within a financial year, banks deduct (TDS) Tax Deducted at Source. However, people with income less than the taxable amount may file the Form 15G or Form 15H to avoid the TDS deduction.

Key Takeaways

Short-term FDs are low-risk fixed-income investments, which provide a guaranteed return and a tenure usually between 7 days and 12 months. They offer better interest rates than savings accounts, flexible investment periods, and easy access to liquidity, hence suitable for short-term financial objectives. The interest charged is taxable, and the returns are usually lower than those of long-term investments.