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In FD vs RD, the main difference is how the money goes in: a fixed deposit takes one lump sum for a chosen period, while a recurring deposit takes a fixed amount every month and pays it back with interest at the end. Both earn a rate decided when you open them, and a bank's card normally lists one figure that covers both for a given term.
An FD scheme suits money you already have, such as a bonus or the proceeds of a sale. An RD suits money you will save from each month's income. This page explains each one, compares them in a table, and shows how much interest an FD of 1 lakh, 50 lakh or 1 crore can produce.
At a glance
FD
One lump sum, period from 7 days to 10 years at most banksRD
Monthly instalments, usually 6 months to 10 yearsRate
Fixed at opening; banks set their own, post office rates set by governmentPayout
FD: at maturity, monthly or quarterly. RD: at maturity onlySafety
Bank deposits insured by DICGC up to 5 lakh for each depositorTax
Interest taxable at slab rate for both
What is a fixed deposit scheme
A fixed deposit, or FD, is money you hand to a bank or the post office for a set time in return for a fixed rate. You choose the period and how you want interest: added to the deposit and paid at the end (cumulative), or paid out every month or quarter (non cumulative). When it matures, you either collect it or roll it over.
Banks set FD rates in tenure bands and update them from time to time. At the post office, the equivalent is the time deposit, offered in four terms between one year and five, which currently pays 6.9% to 7.5%. For how rates are set and how to compare them, see the FD and RD rates overview.
What is a recurring deposit
A recurring deposit, or RD, is a habit built into an account. You fix a monthly amount, for example 2,000 rupees, and a term. The bank debits that amount each month from your savings account. Every instalment starts earning in its own month of arrival, compounded quarterly, and the total comes back at maturity.
Post office RDs run for 5 years and pay 6.7% at present. A longer explanation is on the what is RD page.
FD vs RD at a glance: the main differences
| Point | Fixed deposit | Recurring deposit |
|---|---|---|
| How money goes in | Once, at the start | Every month |
| Who it suits | Someone with a lump sum now | Someone saving from monthly income |
| Interest income during the term | Available monthly or quarterly | Not available; paid at maturity |
| Missed payments | Not applicable | Late fee, and repeated misses can close it |
| Interest on the same total | Higher, as the whole sum earns from day one | Lower, as later instalments earn for fewer months |
| Rate at most banks | Normally one figure covers both | |
| Tax and TDS | Interest taxed at slab rate; TDS above the yearly limit at each bank | |
RD vs FD: why the same total earns different interest
Assume 7 percent for a single year, purely as an illustration. Person A puts 1.2 lakh in an FD on day one. Person B pays 10,000 rupees a month into an RD. Both deposit 1.2 lakh in total.
Person A gets about 8,620 rupees of interest, because the full amount works for twelve months. Person B gets about 4,620 rupees, because the last instalment earns for only one month.
This is not a reason to prefer one; Person B may not have had 1.2 lakh at the start. Use the FD calculator and the RD calculator to try your own figures.
How much interest on FD: monthly income from large deposits
Monthly income from an FD is possible: pick the payout version when you book it. Banks pay slightly less than one twelfth of the yearly figure each month, because they discount it for paying early.
| Deposit | Interest a year | Monthly payout, about |
|---|---|---|
| 1 lakh | 7,000 | 580 |
| 10 lakh | 70,000 | 5,800 |
| 50 lakh | 3,50,000 | 29,000 |
| 1 crore | 7,00,000 | 58,000 |
Remember that only 5 lakh per person at one bank is covered by DICGC insurance, so very large sums are often spread across banks. Tax also takes a share; see how FD interest is taxed.
Getting money out early
FD: most banks let you break an FD before maturity. The bank pays its card rate for the shorter period you stayed, then knocks off a penalty, commonly half a point to one point. Many banks also give a loan or overdraft against an FD, so you do not have to break it.
RD: early closure is allowed at most banks with a similar penalty. Shutting a post office RD becomes possible from its third anniversary, and interest is then recalculated at the plain savings bank rate. Once a full year of instalments is in, a loan against half the balance can be arranged.
Tax saver FD: this 5 year FD cannot be broken early at all.
Before you open either one
- Decide whether you have a lump sum now or will save monthly.
- Check the current rate card at two or three banks for your exact term, and the post office rates.
- Ask about the premature closure penalty and the senior citizen extra if you are 60 or above.
- Add a nominee.
- Keep the FD advice or RD passbook safe and note the maturity date.
The choice depends on your cash flow and the months you can spare the money. If you are unsure, ask the bank or post office staff to explain the terms, or speak to a registered adviser. Banks that tend to pay more are discussed on the highest FD rates page.
Frequently asked questions
Which is better, FD or RD?
Neither is better for everyone. An FD fits a lump sum and earns more on the same total; an RD fits monthly saving. The rate is usually the same at a bank.
Does an FD pay interest every month?
It can. Ask for the monthly payout version at booking; the bank then credits a slightly discounted amount to your savings account each month.
What is the monthly interest on a 1 crore FD?
Assuming 7 percent, roughly 58,000 rupees a month before tax. The actual figure depends on your bank's rate and tax deducted.
Is RD interest higher than FD interest?
The rate is usually the same. But an FD earns more rupees for the same total amount, because the whole sum earns from the first day.
Are FD and RD safe?
Bank FDs and RDs are insured by DICGC to a ceiling of 5 lakh for one person in one bank, including interest. Post office deposits are backed by the Government of India.
Is there a post office FD and RD?
Yes. The post office time deposit is its FD for 1 to 5 years, and its RD lasts five years. The Finance Ministry revises both rates quarterly.
Official sources
- Reserve Bank of Indiawww.rbi.org.in
- India Postwww.indiapost.gov.in
- Department of Economic Affairsdea.gov.in
Rules, amounts and portals can change. Check the official source before you apply or deposit.