Fixed Deposit Double Scheme - Benefits, Interest Rate, Risk, Comparison with FD

In the world of investing, every investor is in search of an investment option that can double his hard-earned money, and to do this he keeps digging and finding these options. One such popular option available to the investors is the Fixed Deposits Double Scheme. As the name suggests, these are FD plans which offer the depositor a double amount of the initial deposit after a fixed tenure. 

Doubling one’s funds overnight is practically not feasible and involves a pile of risk, but with FDs, this can be done in a comparatively safe and secure manner with possession of low risk. Various banks offer this investment option across India, which we have named a few later in this article. If we talk about the working of these FD plans, they operate in such a way that the interest rate and tenure align with one another and double the sum, which is then paid to the investor on the maturity. Now let us discuss more about this scheme. 

FEATURES

1. Flexibility:

The minimum amount to start a double scheme FD is in hundreds or thousands while the maximum limit stands at lakhs, which makes it flexible for every depositor to invest in these schemes depending on their financial position and feasibility to invest. (Deposit amounts and interest rates vary from bank to bank)

2. Convenience:

Nowadays, banks have amazing infrastructure which makes it very easy and convenient for investors to walk in and open/start any FD account. Some banks also offer doorstep services via online infrastructure. 

3. Loans:

The fund deposited in these FD plans can be pledged to avail loans from some commercial banks that allow and facilitate loans against FD. 

4. Premature Withdrawals:

The rules regarding premature withdrawal vary across banks. Generally, the banks allow premature withdrawals to depositors but subject to applicable penalties. 

5. Interest Rates:

The returns are aligned with the tenure so as to double the amount of deposit after a fixed time frame. The interest rates are decent and differ from bank to bank. 

Must Check: Current Fixed Deposit (FD) Interest Rates

6. Risk:

The risk can be considered similar to the risks possessed by any other FD in banks. Comparatively, the bank FDs have less risk as the returns/interest rates are not directly linked to the market, and investors are offered a fixed interest rate. 

7. Nominations:

While opening a double scheme FD account, depositors can opt to nominate another person in the application process. 

FDs v/s DOUBLE SCHEME FDs

When we talk about the general FDs, the depositor is given a wide choice to choose from different options that differ in the interest rate and tenure. Longer the tenure, the higher the interest rates. These rates differ from bank to bank and are clubbed with higher rates for senior citizens. The interest payouts are made monthly, quarterly, semi-annually, or annually as per the chosen option by the depositor. The principal along with applicable interest is paid back to the investor at maturity. 

Now talking about the Double Scheme FDs, here the tenures are fixed and predetermined. The investor will receive a 2X amount at the end of the tenure and throughout this tenure, the interest or returns are constant which makes sure the fund is actually doubled in the given tenure.

 The interest gets reinvested in this plan benefitting from the power of compounding. If mathematically we come to the computation of rates, the interest on Double scheme FDs will most often be higher than normal FDs. Unlike general FDs, there are no interest payouts during the tenure. It is paid at maturity along with the principal. 

SOME FD DOUBLE SCHEMES

1. Double Deposit Plan (DDP) - Indian Bank/Allahabad Bank (merged):

DDP is a combination of the FD scheme and RD scheme. The returns are compounded at quarterly intervals. However, it is paid along with the principal amount only at the end of the tenure.

The minimum amount required to initiate this FD is Rs.1,000, and higher sums in multiples of Rs.1,000 are also accepted.

The maximum tenure for which DDP deposits are accepted is restricted to 10 years i.e. 120 Months.

The account can be initiated by the following:

• Individual - Single Accounts
• Two or more individuals - Joint Accounts
• Limited Liability Companies
• Clubs, Associations, Societies, Trusts, etc.
• Blind Person, Minors, Illiterate Persons
• Sole Proprietary Concerns
• Partnership Firms
• Joint Hindu Families
• Panchayats, Municipalities, Govt. & Quasi-Government Bodies
• Educational, Religious, Charitable Institutions, etc.

2. BoI - Double Benefit Term Deposit (Bank of India):

This account provides a higher return on the principal at the end of the stipulated tenure as the interest is compounded every quarter. However, the principal and interest accrued are payable at the end of the tenure for which the deposit is initiated with the bank. This plan is best suited and ideal for short-term and medium-term investors who aim to invest for 6 to 120 months.

The minimum amount required to open this account is Rs.10,000 in the case of metro and urban branches. And it is Rs.5,000 in the case of rural, semi-urban branches and senior citizen applicants. 

The accounts can be initiated by the following:

• Individual — Single Accounts
• Two or more individuals — Joint Accounts
• Sole Proprietary Concerns
• Partnership Firms
• Illiterate Persons
• Blind Persons
• Minors
• Government and Quasi-Government Bodies
• Panchayats
• Limited Companies
• Associations, Clubs, Societies, etc.,
• Trusts
• Joint Hindu Families
• Municipalities
• Religious Institutions
• Educational Institutions
• Charitable Institutions

Frequently Asked Questions (FAQs)

1. Will TDS be deducted on interest income?

Yes, TDS will be deducted if the interest income received by the depositor in a financial year exceeds Rs.40,000.

2. What is the key difference between FD and Double Scheme FDs?

In general FDs, the interest payouts are made periodically i.e monthly, quarterly, etc. depending upon the chosen option by depositors. However, in the case of double deposit schemes, interest earned on the deposit is compounded and paid back at maturity along with the principal amount.

Also, the FD is widely available across banks & financial institutions, Whereas, the double deposit FD schemes are available with a few banks.  

3. Are double scheme FD accounts auto-renewed?

Most commercial banks offer auto-renewal options so yes it is possible. But to stop the renewal, prior communication with the bank needs to be done. 

4. How does money gets doubled in the fixed deposit double scheme?

As discussed, the interest rate and tenure align with one another and the reinvestment of interest result in doubling the sum at maturity of the scheme.

5. Is the interest rate identical for everyone?

The interest rates are identical for general citizens. However, the scheme offers higher interest rates to the members of the armed forces & senior citizens.  

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