Flexi Deposit: Why It Can Be Better Than A Fixed Deposit?

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Anand recently recounted his experience on how he lost money in a fixed deposit he would have never have lost had he to invest in a flexi deposit.

Exactly last year he invested in a fixed deposit of a leading private sector bank at 9.5 per cent for two years. He had invested a sum of Rs 10 lakhs. Now, he suddenly has a medical emergency after 11 months and decided to break the entire fixed deposit.

Flexi Deposit: Why It Can Be Better Than A Fixed Deposit?
He needed just Rs 2 lakhs for his father's surgery, but had to break the FD of entire Rs 10 lakhs.

Now, two things happened here. He lost one per cent by way of penalty that the bank had levied for breaking the fixed deposit early and secondly, he got lesser interest rate for breaking the FD. More importantly, he needed just Rs 2 lakhs but had to break the entire deposit. Now, when he wants to place the remaining Rs 8 lakhs in the balance of the fixed deposit, the interest rate has fallen from 9.5 per cent to 8.75 per cent, yet another loss.

What would happen if he had to place money in a flexi deposit?

If Anand had to invest in a flexi deposit he would have been able to just withdraw Rs 2 lakhs and the remaining deposit of Rs 8 lakhs would continue to have attracted 9.5 per cent. He would not have lost on falling interest rates, penal charges by the bank etc. Clearly, the Flexi deposit is a great scheme and investors should note their advantages.

How To Invest in Flexi Deposits?

Most of the banks offer a Flexi Deposit. These deposits are linked to your savings account. So, what happens when you have an emergency is that the amount is transferred to your savings account and the balance in the fixed deposit continues to attract interest. You do now have to break the entire deposit. Banks like IndusInd Bank, IDBI Bank etc., have Flexi deposits.

Check with your bank before you decide on placing a fixed deposit. If they have a Flexi deposit it would be a better choice especially during an emergency.


A Flexi deposit offers the best of both worlds and many advantages. It gives you a higher interest rate than a savings bank account and at the same time offers you money when you need the same during an emergency. A win-win situation for all.


Read more about: flexi deposit
Story first published: Saturday, November 15, 2014, 12:41 [IST]
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