Difference Between FD and Recurring Deposits: Where to Invest?

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Difference Between FD and Recurring Deposits: Where to Invest?

Difference Between FD and Recurring Deposit: An Overview

If you want to create a corpus to reach your financial objectives or allocate a fixed sum for a crisis, a bank deposit is a simple and quick method to do it. It is among the most secure investment solutions that is simple to create, run, and withdraw from.
Fixed Deposits (FD) and Recurring Deposits (RD) are both available from banks. These deposits are both investment choices that promote savings while also guaranteeing interest returns. These are two of the most popular investment programs in India, particularly among risk-averse investors. Nevertheless, there are several distinctions between FD and RD. These differ on the basis of investment, duration, interest rates, and frequency of interest distribution. How, though, do you select between the two? Let us examine the characteristics, advantages,and variations in FD and RD.

What are Fixed Deposits?

The fixed deposit is a classic savings product that provides investors with set returns. Investors can make a lump sum investment at the start of the FD period and must remain engaged till the investment period expires. An FD's term might range from 7 days to ten years. Fixed deposits (FD) have a minimum investment amount of INR 100 and no maximum investment amount.

Fixed deposits are among the most attractive investment products because they provide assured returns. Banks and commercial organizations provide fixed deposits with interest rates ranging from 3% to 7%. Senior folks are eligible for higher FD interest rates. Investors can avail themselves of their FD investing plans at any time. Many banks and other financial institutions, however, levy a penalty for this. Furthermore, the regulations for premature withdrawal varied amongst banks. Alternatively, investors might borrow against their fixed deposit account. This will allow them to address their liquidity needs while maintaining their FD investment. Banks provide loans such as school loans and loans against property in exchange for a set deposit.

Types of Fixed Deposits in India

  • Cumulative Fixed Deposit: The return on your corpus is compounded on a specified period in a cumulative FD. Suh interest is paid along with the principal amount at the time of the maturity of the deposit, not before that date.
  • Non-Cumulative Fixed Deposit: This one is practically the inverse of a cumulative FD in that you can withdraw the interest upon your deposit amount whenever you choose, before the maturity time. This allows you to earn a consistent income from your deposits. The rate of interest, however, is about the same for both cumulative and non-cumulative interest.

Benefits of Fixed Deposits

  1. Risk: Fixed deposits protect your corpus and so pose no risk unless you decide to withdraw your deposit before the maturity date. Because they are strictly controlled funds by the RBI, the potential scam is eliminated.
  2. Fixed rate of Interest: A fixed rate of interest in an FD guarantees you a return on your investment. These may be consistent, but they will undoubtedly produce capital growth on your corpus.
  3. Reliability: While most forms of FDs are risk-free, when selecting FDs including corporate FDs or other tax-saving deposits, make sure to examine the credibility of the firm. Before investing your money, you ought to be conscious of the credit score of such deposits.
  4. Withdrawal Effects: If you do not want to incur additional fees, you must grasp the withdrawal policies of your preferred fixed deposit type. Banks often charge 0.1% to.75% for early transactions from your fixed deposit account.
  5. Flexibility: You may pick the sort of FD you want to invest in based on your investing goals. You may generate monthly income on your money by selecting a non-cumulative form of deposit. Furthermore, these generate larger returns than typical accounts such as savings.

What are Recurring Deposits?

If you don't have a large sum to invest but can set away little sums each month, RDs are a good option. For example, you can set aside money in an RD on a monthly basis and schedule it to meet your child's school costs at the start of the school year. A couple that enjoys traveling could save funds in an RD for their dream international vacation. With recurring deposits, you can invest a certain amount each month and receive interest. At maturity, the interest is due in addition to the capital.

Investors are not permitted to withdraw their RDs investments early. They can, however, borrow against their RD. Banks provide loans such as school loans and loans against real estate in exchange for a recurring deposit. A mortgage EMI calculator may be used by investors to evaluate their loan EMI. The interest on these investment programs is calculated quarterly. The RD rates of interest differ from each bank since the rates are determined by the deposit's duration and deposit quantity. The RD rates in India range from 3.50% to 8.50%. Old-aged depositors are also eligible for advantageous interest rates. Senior citizen deposits rates vary from 0.25% to 0.75% higher.

Benefits of Opening Recurring Deposit Accounts

  • Investment Efficacy: The investor must deposit a certain amount on a regular basis as part of a recurring deposit program in order to develop a disciplined approach to saving. 
  • Simple to invest: Recurring Deposit is indeed the ideal choice for this since it will be simpler for salaried clients to set aside a specific amount each month as savings. The interest rate for RD is also locked in, protecting the investment from changes in interest rates. RD plans often provide guaranteed returns.
  • Liquidity: Since money may be withdrawn at any moment in an emergency, RDs are regarded as being very liquid. Premature withdrawals are generally permitted, but it is important to be aware that they may result in lower interest rates or fines.
  • Convenient Investments: Regular investments in RDs are simple to make because these accounts can have standing instructions that fund them on a regular basis. Simply instructing the bank to credit the account from the connected savings or current account once a month would be enough for the consumer.
  • Guaranteed Returns: These deposits give assured returns, in contrast to other monthly investment plans like the systematic investing plans provided by mutual funds.

Difference Between FD and Recurring Deposit

The following are the distinctions between recurring deposits and fixed deposits:

ParticularsFixed DepositsRecurring Deposits

Rates of Interest


The interest rate on FDs ranges from 3% to 7%.Interest rates on RDs range from 3.5% to 8.50%.
Payout regularityFDs permit payments on a monthly, quarterly, or annual basis. Consequently, they make a reliable source of revenue.Gains from RD are only realized when the scheme reaches maturity. A lump sum payment is due to investors at the conclusion of the investment period.

Untimely withdrawals


Untimely withdrawals are

not accessible. Depositors do have the option to reduce their stake and withdraw the money. However, there is less interest in these situations.

Not accessible. Depositors do have the choice to reduce their stake and withdraw the money. However, there is less interest in these situations.
Automatic RenewalsAvailableNot available



Due to the one lump sum payment made at the start of the term, investors cannot fail.


The bank has the power to cancel the account if the depositors don't make RD payments for six months in a row.
Investment Frequency 

FDs are one-time investment choices that do not instill a depositors' habit of making monthly investments.


RDs are common investment choices that call for monthly contributions from investors throughout the length of the plan. fostering a habit of investing among the depositors

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A recurring deposit (RD) appears to be the best option for persons who don't have a lump sum to put in an FD but can manage a little amount of investment from income each month. The ideal candidates for RD and FD are risk-averse investors, who are frequently in the lower tax brackets. To determine which option is most suitable for the amount you can invest, use an online recurring deposit calculator. Even though a major investment product cannot satisfy all objectives, RDs are favored by many due to their significantly lower financial burden and nearly equal returns to FDs.

  • Can my FD earn interest on a monthly basis?

  • Can I obtain a credit card secured by FD or RD?

  • Which type of deposit is better: a fixed deposit or a recurring deposit?