Liquid FD: Bank of Baroda has introduced this instrument; know terms and conditions

Liquid FD: Bank of Baroda has introduced this instrument; know terms and conditions
Liquid FD: Bank of Baroda has introduced this instrument; know terms and conditions

Bank of Baroda, popularly referred to as BoB – has introduced an alternative to the good, old, traditional fixed deposit. The PSU bank has named it ‘Liquid Fixed Deposits’. According to the bank, the instrument might appeal to customers who are on the lookout for innovative deposit solutions which combine assured, competitive returns while offering liquidity. Lack of liquidity has been traditionally regarded as one of the key constraints of the Fixed Deposit (FD). BoB has tried to address the shortcoming through this instrument.

Fixed deposits are regarded by some young investors as fuddy duddy and an instrument belonging to the old brick-and-mortar economy. However, FDs have a very solid customers base, thanks to its stable and steady interest income. An overwhelming section of the retirees of this country are dependent on FDs to meet their regular expenditure. They simply cannot take risk with their limited capital base and, therefore, would not put their capital in stocks and mutual funds. For the safety of capital, this vast section of population will rather prefer to accept a relatively low interest rate.

What is liquid fixed deposit

Bank of Baroda has defined its liquid FD as “A product offering a combination of competitive interests as well as easy liquidity. Your convenient way of utilising deposits, giving you the best of both, long-term as well as short-term deposit plans.” While listing its benefits, BoB has mentioned the following points:

  • Attractive rate of interest
  • Flexible fixed deposit option
  • Flexible withdrawal limit
  • Offers good return
  • Additional 0.5% interest for senior citizens
  • Loans of up to 95% of the FD value

Minimum investment amount in liquid FD

The interest payout will be done on maturity of the instrument only. One can invest a minimum amount of Rs 5,000 in this instrument. The minimum period of deposit is 12 months while the maximum period is 60 months. BoB has also stated that there will be no penalty for premature payment. But it has to be within Rs 5 lakhs and it has to remain with the bank for a minimum period of 12 months. However, “Interest should be paid after deducting a penalty of 1.00% from such an applicable Interest Rate for the period for which the deposit has remained with the Bank or the Contracted rate whichever is lower in cases which are subject to charging penalty in case of amount of withdrawal is less than Rs. 1.00 Crores,” the bank has written.

 Though ‘liquid FD’ (Fixed Deposit) is not a part of the standard financial lexicon, the term is used to denote an FD which carries a substantial degree of liquidity. In other words, it can be closed prematurely and the accountholder can take out the cash quickly.  Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today