In Nepal, the culture of saving is deeply ingrained in our daily lives. Whether you are a salary earner managing monthly expenses, a small investor looking for safety, or a family relying on remittance inflows, the goal is the same: to secure a financially stable future.
However, when it comes to actually depositing that hard-earned money, many Nepalis find themselves confused. Should you keep it accessible in a Savings Account, or lock it away for higher returns in a Fixed Deposit (FD)? It is a common dilemma, especially with banks in Nepal offering varied interest rates and benefits for both.
The truth is, there is no one-size-fits-all answer. The 'better' option entirely depends on your personal financial goals, how soon you might need your money, and how quickly you might need that cash in an emergency.
So, let us clear the confusion. In this blog post, we will break down the key differences between a Savings Account and a Fixed Deposit to help you choose the right option that maximizes your returns while meeting your needs.
A savings account is an interest-bearing deposit account held at a bank or financial institution that allows you to deposit and withdraw money as per your needs. It serves as a secure vault for your funds, separating the money you don't need for immediate daily expenses from the cash in your pocket.
In Nepal, these accounts operate under the regulations of Nepal Rastra Bank (NRB), ensuring that your deposits are safe and the banking process remains transparent. The primary purpose of a savings account is to provide a safe place to store your money where it earns a modest interest rate, rather than sitting idle.
Moreover, it offers the convenience of high liquidity, meaning your money is always ready to use at your fingertips whenever an emergency strikes.
Have you ever wondered how your money actually grows inside the bank? In Nepal, the interest on a savings account is calculated based on your daily closing balance.
This means every day you keep money in the account, it earns a little bit of interest. However, you won't see that money immediately; banks typically credit this accumulated interest to your account either monthly or quarterly, depending on the specific bank's policy.
But a savings account is more than just a place to earn interest. It is designed to make your financial life easier with a host of modern features:
Gone are the days when a "savings account" meant just one standard option for everyone. To cater to the diverse needs of the Nepalese population, from students just starting out to migrant workers supporting their families, banks and financial institutions in Nepal have categorized savings accounts into various types.
Each type comes with its own set of rules, benefits, and target audiences. So, before you rush to the nearest branch, let us explore the different types of savings accounts available to help you decide which one fits your profile best.
This is the most common type of account suitable for the general public who wants to save money for future needs. Whether you are a homemaker, a freelancer, or a small business owner, a Regular Savings Account gets the job done.
However, you need to be mindful of the minimum balance requirement. Most commercial banks in Nepal require you to maintain a minimum balance ranging from Rs. 500 to Rs. 1,000 (or more for specific schemes) to keep the account active and avoid penalty charges.
As the name suggests, this account is specifically designed for salaried employees. It is usually opened by the employer on behalf of their staff to facilitate the smooth transfer of monthly wages.
The biggest advantage of a Salary Savings Account is that it typically comes with a zero minimum balance requirement. This means you don’t have to worry about maintaining a specific amount in your account, giving you full access to your hard-earned salary down to the last rupee.
To encourage financial literacy among the youth, banks offer Student Savings Accounts tailored for school and college-going individuals. These accounts are accessible with a very low minimum balance requirement, sometimes as low as Rs. 100 or even zero.
While they are great for building a savings habit, they may come with certain restrictions, such as limits on daily withdrawal amounts or transaction features, ensuring that the money is used wisely rather than spent impulsively.
With a significant portion of Nepal's economy driven by foreign employment, the Remittance Savings Account is a crucial tool for families receiving money from abroad.
Designed specifically for foreign income, these accounts often offer higher interest rates, usually 1% more than regular savings accounts, as an incentive. Besides the attractive interest, account holders may also receive exclusive benefits on remittance processing fees and exchange rates.
While Fixed Deposits might steal the spotlight when it comes to interest rates, Savings Accounts remain the backbone of personal finance for a reason. They offer unparalleled flexibility and convenience that locked investments simply cannot match.
So, let us look at the key benefits that make a savings account an essential tool for every Nepali.
The biggest selling point of a savings account is high liquidity. Your money isn't locked away; it is available to you 24/7.
Whether you need cash from an ATM at midnight or need to transfer funds via mobile banking while shopping, your money is ready to use at your fingertips without any penalty.
Life is unpredictable, isn't it? From sudden medical bills to urgent family needs, emergencies don't come with a warning. A savings account acts as your financial safety net, ensuring you have immediate funds to handle these unforeseen circumstances without needing to take out a loan or break a fixed investment.
Unlike the stock market, where your capital can fluctuate wildly, a savings account is a low-risk option. Your principal amount remains safe and steady, regardless of market volatility. For those who prioritize safety over high returns, this is the most secure place to park your cash.
Keeping cash at home in a safe or wallet earns you absolutely nothing. In fact, due to inflation, its value decreases over time. A savings account, however, ensures your idle money keeps growing. Even if the rate is modest, earning 3% to 5% is always better than earning 0%.
A savings account is the starting point of your financial journey in Nepal. You typically need one to access other essential services. For instance, if you want to apply for a Demat account to fill IPOs, link your account to ConnectIPS, or apply for a credit card, having an operational savings account is a mandatory prerequisite.
You no longer need to stand in long queues to pay electricity or water bills. With a savings account linked to mobile banking or digital wallets such as eSewa or Khalti, you can automate or instantly pay your utility bills, school fees, and internet charges from the comfort of your home.
As convenient as they are, savings accounts are not the ultimate solution for wealth accumulation. While they offer safety and liquidity, they come with certain drawbacks that might hinder your long-term financial growth. Here are the limitations you need to be aware of:
Lower Interest Rates
The price you pay for easy access to your money is a lower return. Compared to Fixed Deposits (FDs) or debentures, the interest rates on savings accounts are significantly lower. If your goal is to grow your wealth substantially over time, a savings account alone won't cut it.
Returns May Not Beat Inflation
This is the silent wealth killer. In Nepal, where the inflation rate often hovers around 5% to 7%, a savings account offering a 3-4% interest rate means you are effectively losing purchasing power over time. Your money grows numerically, but it buys less tomorrow than it does today.
Temptation to Overspend
High liquidity is a double-edged sword. Since the money is just a swipe or a click away, the temptation to spend it on non-essentials is high. It takes serious discipline to let money sit in a savings account without dipping into it for that new phone or an impromptu trip.
Minimum Balance Penalties
Unlike keeping cash under your mattress, many savings accounts require you to maintain a minimum balance. If your balance dips below this threshold, say Rs. 500 or Rs. 1,000, the bank may deduct a penalty fee, slowly eating away at your principal.
Variable Interest Rates
The interest rate on a savings account is not locked in. Banks in Nepal can revise these rates based on market liquidity and Nepal Rastra Bank directives. So, a rate that looks good today might drop tomorrow without much notice.
If you are looking for a way to earn higher returns without taking the risks associated with the stock market, then a Fixed Deposit, popularly known as Mudhati Khata in Nepal, might be your answer.
A Fixed Deposit is a financial instrument where you deposit a lump sum of money for a specific period, ranging from a few months to several years. In exchange for locking your funds away, the bank guarantees you a fixed interest rate that is significantly higher than what you get in a standard savings account.
Think of it as a contract: you promise not to touch the money for a set time (the tenure), and the bank promises to pay you a handsome interest rate in return. Once the tenure ends (maturity), you get your principal amount back along with the accumulated interest. It is the go-to investment for Nepalis who want guaranteed returns with zero market risk.
The mechanism of a Fixed Deposit is quite straightforward, yet it is much more rigid compared to a savings account. When you open a Fixed Deposit, you essentially agree to lend a lump sum of money to the bank for a pre-determined period. In return, the bank locks in a specific interest rate for you that remains constant throughout the tenure, regardless of whether the market rates crash or soar the very next day.
One of the defining features of FDs in Nepal is the flexibility in tenure. You are not forced into a long-term commitment if you don't want one. Banks offer periods ranging from as short as three months to as long as ten years.
This allows you to align the investment duration perfectly with your financial timeline, such as maturing the FD exactly when your insurance premium is due or when you plan to make a large purchase.
However, not all FDs are created equal. The interest rate you receive depends on several factors:
The most critical aspect to remember is the rule regarding premature withdrawal. Since an FD is designed to be a locked investment, breaking it before the maturity date comes with a cost. If you withdraw your money early, banks will levy a penalty fee and significantly reduce the interest paid, often dropping it down to the standard savings rate.
To avoid this loss, most banks in Nepal offer a facility called 'Loan Against FD,' where you can instantly borrow up to 90% of your deposited amount at a slightly higher interest rate, allowing you to access cash without breaking your investment.
Just like savings accounts, Fixed Deposits come in various shapes and sizes to fit different financial needs. Whether you have a lump sum ready to invest or want to build a corpus over time, there is a specific FD scheme for you.
If you have cash that you won’t need immediately but aren't ready to lock away for years, a Short-Term FD is the perfect solution. With tenures typically ranging from just a few weeks to under a year, it is ideal for parking idle funds that would otherwise sit in a savings account.
While the interest returns are generally lower than long-term options, they are still significantly better than what you would earn in a standard savings account.
For those looking to preserve wealth and maximize returns, the Long-Term Fixed Deposit is the way to go. These deposits usually have a tenure of one year or more. Since you are committing your money for a longer period, banks reward you with their highest interest rates. This is best suited for long-term goals like saving for a house down payment or a child’s higher education.
In a Cumulative FD, you do not receive interest payouts during the tenure. Instead, the interest is compounded, meaning you earn interest on your interest, and is paid out along with the principal amount only at maturity. This power of compounding makes it an excellent choice for investors who want to maximize their total returns and don't need a regular income stream.
Unlike the cumulative option, a Non-Cumulative FD pays out the interest at regular intervals, such as monthly or quarterly. This type of deposit acts as an income generator, making it incredibly useful for retirees or individuals who rely on the interest for their daily expenses while keeping their principal amount intact.
Not everyone has a large lump sum to invest upfront. A Recurring Fixed Deposit allows you to deposit a fixed amount of money every month for a specific period. It is a fantastic tool for salaried individuals or students to build a disciplined savings habit, eventually accumulating a substantial lump sum with interest by the end of the tenure.
Recognizing the contribution of migrant workers to the economy, banks in Nepal offer specialized Remittance Fixed Deposits. These are designed exclusively for funds sent from abroad. The biggest attraction here is the premium interest rate, often 1% higher than standard FDs, making it a highly popular choice for families of migrant workers looking to grow their foreign income.
For risk-averse investors, FDs are often the holy grail of investment. The primary benefit is the predictability of returns. You know exactly how much you will earn the day you open the account, regardless of market fluctuations. This stability provides immense peace of mind.
Furthermore, FDs are a low-risk investment. Unlike the stock market, where your capital can erode, an FD guarantees the safety of your principal amount. Additionally, because the interest rates are higher than those of savings accounts, FDs offer better protection against inflation, ensuring your money retains more of its value over time compared to leaving it idle.
However, the security of an FD comes with a trade-off: liquidity. The most significant limitation is that your funds are locked for a fixed period. You cannot simply walk to an ATM and withdraw cash from your FD when you feel like it.
This lack of flexibility makes FDs unsuitable for emergencies. If a sudden need arises and you are forced to withdraw your money before the maturity date, you will face a penalty for early withdrawal. Banks will deduct a fee and lower your interest rate, which means you could end up earning far less than you anticipated.
| Features | Savings Account in Nepal | Fixed Deposit Accounts in Nepal |
| Liquidity | Very high. Money can be withdrawn anytime without penalty | Low. Funds are locked for a fixed tenure; early withdrawal may incur penalties |
| Interest Potential | Lower interest compared to FD; suitable for short-term holding | Higher interest due to fixed lock-in period and compounding |
| Risk Level | Lower interest compared to FD; suitable for short-term holding | Very low risk; offers predictable and guaranteed returns |
| Flexibility | Highly flexible. Deposits and withdrawals are allowed anytime | Limited flexibility. Deposit amount and tenure are fixed |
| Accessibility | Easy access via ATM, mobile banking, QR payments, and bank branches | Access only at maturity or through premature withdrawal |
| Ideal Usage | Emergency funds, salary deposits, daily expenses, short-term savings | Long-term savings, idle funds, capital preservation, and planned financial goals |
The golden rule of banking is simple: the longer you part with your money, the more the bank pays you. Fixed Deposits earn significantly higher interest rates because, by locking your funds for a set period, you give the bank the stability to lend that money out as long-term loans to other borrowers. Since the bank knows you won't withdraw that cash tomorrow, they reward you with a bigger slice of the profit.
Moreover, the magic of FDs often lies in the power of compounding. In a Cumulative FD, the interest you earn in the first quarter earns its own interest in the second quarter, and so on. Over a few years, this "interest on interest" effect can substantially boost your final payout.
On the other hand, savings accounts offer lower rates because of the cost of flexibility. The bank has to keep a portion of your money ready in cash reserves just in case you decide to withdraw it at an ATM five minutes from now. This liquidity comes at a price, which is why savings interest rates will always trail behind FDs and inflation.
Whether you choose a savings account or a Fixed Deposit, both are extremely low-risk investments compared to the volatile stock market. However, there are key safety nets you should know about:
Ultimately, the battle between a Savings Account and a Fixed Deposit isn't about which one is superior in isolation. It is about which one aligns better with your current life stage and financial necessities.
To help you decide, ask yourself: "Do I need this money tomorrow, or can I afford to forget about it for a year?"
A savings account is your financial lifeline for day-to-day operations. It is the engine that keeps your daily life running smoothly. You should prioritize keeping money here if:
An FD is for wealth accumulation and preservation. It is where your money goes to work when you don't need it. You should opt for an FD if:
Why choose one when you can have the best of both worlds? The smartest approach for most Nepalis is to use a Hybrid Strategy that balances liquidity with growth.
Here is how you can structure it:
Saving money is a great habit, but how you save matters just as much as how much you save. Many people in Nepal unknowingly fall into traps that either erode their wealth or leave them financially vulnerable when they need cash the most.
Here are the most common pitfalls to avoid to ensure your hard-earned rupees are working efficiently for you:
At the end of the day, the choice between a Savings Account and a Fixed Deposit is not about picking a winner, but about understanding the trade-off between liquidity and returns.
A Savings Account offers you the freedom to access your money whenever you need it, making it the bedrock of your daily financial life and emergency planning. On the other hand, a Fixed Deposit is a powerful tool for wealth preservation, offering guaranteed growth for the money you can afford to set aside.
Instead of relying on just one, a balanced financial plan uses both. Keep your safety net liquid, and let your surplus grow securely.
If you are ready to start saving or investing, do not just walk into the first bank you see. Use our Saral Banking Sewa comparison tools to check the latest interest rates for Savings Accounts and Fixed Deposits across all commercial banks in Nepal. Compare, calculate, and make an informed decision to maximize your financial potential today!
In terms of the safety of your principal amount, both are equally safe. Both account types are regulated by Nepal Rastra Bank (NRB), and deposits up to Rs. 500,000 are insured by the Deposit and Credit Guarantee Fund. However, an FD is considered "safer" regarding returns because the interest rate is locked in and won't drop even if market rates decrease.
Yes, you can, but it comes at a cost. If you withdraw your money before the maturity date, banks generally levy a penalty fee and reduce the interest rate significantly. A smarter alternative is to take a Loan Against FD, where you can borrow up to 90% of your deposit instantly without breaking the investment.
Visiting every bank's website individually is time-consuming and confusing. Instead, you can use the Savings Account Comparison Tool on Saral Banking Sewa.
Absolutely! Investing in an FD is a great way for students to learn financial discipline. Even if you don't have a large lump sum, students can opt for a Recurring Fixed Deposit, where you save a small amount (like Rs. 500 or Rs. 1000) monthly. It prevents impulsive spending and helps you graduate with a solid financial cushion.
Opening an FD online via mobile banking or internet banking is much better in terms of convenience. It saves you the hassle of paperwork and visiting the branch. The interest rates are typically the same for both methods, but online processes are instant and can be done from the comfort of your home.
Interest rates for FDs change frequently based on liquidity in the market. To ensure you are getting the highest return, visit the Fixed Deposit Comparison Page on Saral Banking Sewa. You can filter banks by tenure (e.g., 1 year, 5 years) to see who is offering the highest rate right now.
Yes, this is one of the best features of an FD. You can pledge your Fixed Deposit certificate as collateral to get a Loan Against FD. Banks typically offer up to 90% of the deposit amount as a loan with very minimal processing procedures and an interest rate usually just 2% higher than your FD rate.
Yes, interest income earned from both Savings Accounts and Fixed Deposits is subject to tax. The government levies a 5% Tax Deducted at Source (TDS) on the interest earned. This tax is deducted automatically by the bank before crediting the interest to your account.
A general rule of thumb is to keep 3 to 6 months' worth of living expenses in your savings account as an emergency fund. This ensures you can cover rent, groceries, and medical emergencies without stress. Any amount above this limit should ideally be moved to an FD to earn higher returns.
Yes, almost all Class 'A' commercial banks (like Nabil, Global IME, NIC Asia, etc.) allow you to open a Fixed Deposit directly through their mobile banking apps or internet banking portals. You simply select the amount, tenure, and nominee, and the account is created instantly.
