All You Need to Know About Fixed Deposits

Fixed deposits or FDs are one of the safest and easiest investment options available. The investor opens an FD account and deposits money. In return, the commercial institution is bound to pay a fixed amount of interest at the end of the agreement period. You can open a fixed deposit account either at a bank or at a Non-Banking Financial Institution like HNB Finance.

Things to consider before you apply for a fixed deposit

Consider the stability of the financial institution before you invest your money; whether it’s registered under the Central Bank of Sri Lanka, credit ratings, and the credibility of the board of directors/management. HNB Finance is a subsidiary of Hatton National Bank and is licensed by the Central Bank of Sri Lanka and is well-reputed and trusted with positive credit ratings. Furthermore, HNB Finance provides excellent levels of customer service to the deposit holders.

When you open an FD account you have to choose a tenure, also called term. Tenure, the agreement period of the FD, can start from 1 month and go up to 5 years. The tenure options vary depending on the financial institution. For example, HNB finance’s minimum tenure is 3 months.

Let’s say you have chosen the tenure. Within that period, you can’t withdraw the deposit or access the account. There’re predetermined interest rates for each tenure, usually the longer the tenure the higher the interest rate is. Check the below sample interest rates table.

TenureMonthly (p.a.)A.E.RMaturity (p.a.)A.E.R
3 Months18.5020.1519.5020.97
6 Months19.0020.7520.0021.00
12 Months19.5021.3421.2521.25

According to this table, if your FD’s tenure is 1 year, you’ll be entitled to an interest rate of 21.25% per annum. For 100,000 LKR, you’ll get around 21,250 LKR interest at the end of the year.

Use this equation to calculate the interest: A = P(1 + rt)

A is the total – principal amount plus interest after a time t -, P is the principal amount, r is the interest rate per annum and t is the tenure in years.

You can get the information about HNB Finance FDs here.

What happens if you withdraw the funds before the tenure ends?

In case you wanted to withdraw the FD before the tenure ended, you’d lose the whole or a part of the accumulated interest. So, decide wisely before you open an FD account. You should be confident that you won’t need the FD funds within the tenure period.

One way to deal with this issue is by opening multiple FDs with different tenures. For example, if you have 3 FDs with tenures of 1,2 and 3 years, the returns are accessible at each year-end. This is called fixed deposit laddering.

Types of Fixed Deposits

There are many different types of fixed deposits including senior citizen FDs, and short/long term FDs. Each fixed deposit type comes with different specifications. For example, senior citizen FDs usually get higher interest rates than the other types. It’s best to talk to us at HNB Finance and go through all the options and find what’s best for you.

Pros and Cons of Fixed Deposits


  • There are many ways you can invest your money. But some means require in-depth knowledge and thorough follow up. Take investing in the share market for example; the returns for the investment entirely depend on the behaviour of shares fluctuation. There’s a risk you’ll lose some of your investment. On the contrary, fixed deposits are virtually zero-risk and require no effort from you to gain profits.
  • If your bank or the NBFI is an accredited institution of the Central Bank of Sri Lanka and a reputed organization, your investment is safe and insured.
  • FDs’ interest rates are higher than what savings accounts offer.


  • You won’t be able to get the full interest in case you withdraw your funds before the tenure is completed.
  • Compared to some profitable investments, fixed deposit interest rates are usually lower.

Looking at the big picture, FDs are a sort of passive income. You don’t need to attend to the process, your funds just grow steadily over time.

Saving is a habit of a person who succeeds. And, the ability to save money is a sign of a successful person.

HNB Finance offers the best-fixed deposit interest rates in Sri Lanka. To find out more about our FD plans check out our website here.