What is Cumulative Deposit? Top Cumulative Deposit Rates in India

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What is Cumulative Deposit?


Fixed deposit schemes have been used by the Indian population for decades and it is considered one of the safest financial instruments to save and protect your money. During the stock market volatility, people tend to invest the majority of their money in fixed income instruments such as fixed deposits and debt instruments. Fixed deposits offer fixed returns in the form of interest. Based on the interest payout, fixed deposits are classified into cumulative fixed deposits and non-cumulative fixed deposits. In this article, we are going to learn about what is cumulative FD, cumulative deposit meaning, cumulative fixed deposit, and cumulative credit in bank meaning. 

What is a Cumulative Deposit? 

In a Cumulative fixed deposit, the interest accrued on your principal amount is reinvested until the maturity period ends. Hence, a cumulative deposit gives you the benefit of compounding. Let's say, you have invested Rs. 100,000 in a cumulative fixed deposit with a bank for one year at an interest of 8% per annum, at the end of the tenure, you will receive Rs. 1,08,000 which is the principal amount with the interest earned.

A cumulative fixed deposit is suitable for salaried individuals or business owners who don't need money currently for their daily expenses and want to save money for the future over a longer term. 

Key Points to Remember While Investing in Cumulative FDs

  • Lower returns than other investment: Investing in fixed deposits gives you guaranteed returns but provide lower return than other financial instruments such as stocks. 
  • Interest rates do not beat inflation: The interest rates offered by fixed deposits usually do not beat inflation which means that you are earning fewer returns than inflation. a 

Top 10 Cumulative Fixed Deposits in India in 2023

BanksInterest rates
Yes Bank6.25%-7%
Mahindra Finance6.20%-6.45%
Lakshmi Vilas Bank5.65%-6.15%
Fincare Small Finance Bank6.50%-6.50%
Shriram City7.50%-7.80%
Sundaram Finance 5.77%-6.27%
Equitas Small Finance Bank 6.50%-6.66%
Canara Bank5.45%-5.95%
Punjab and Sind Bank5.30%-5.80%

How can you maximize your return from cumulative fixed deposits?

Among various types of fixed deposits, Cumulative fixed deposits are the best option to earn a higher return as they offer higher interest as compared to other fixed deposits, also you get interest on interest, and hence, you get the benefits of compound interest and the compounding continues to work until the maturity of the fixed deposit. 

To conclude, a Cumulative fixed deposit is a good investment option to earn compound interest and it gives you a better return than a non Cumulative fixed deposit scheme. Therefore, it can be suitable for those who want to invest for the long term and want to receive a good amount of money at the end of the fixed deposit tenure. However, do your proper research and analysis before investing in any cumulative fixed deposit. 

  • What is a Cumulative deposit?

  • What is Cumulative interest?

  • Which deposit is called a Cumulative deposit account?

  • What is Cumulative credit in bank meaning?

  • Who should invest in a Cumulative fixed deposit?