• Difference between Fixed Deposit and Recurring Deposit

    There is a whole world of investment options out there, with many ways to increase your savings. Fixed deposits and Recurring deposits are among the best ways to mobilize your idle savings and have them work for you.

    Let's take a look at the points with the table below which explains FD vs RD:

    Fixed Deposits Recurring Deposits
    Purpose: To enable investors to mobilize idle savings and earn with a higher rate of interest than regular savings bank accounts. Purpose: To inculcate a regular habit of savings among the public.
    Duration: Fixed deposit accounts can be opened for a minimum of 7 days, to a maximum of 10 years. Duration: Recurring Deposit accounts can be opened for a minimum of 6 months, and a maximum of 10 years.
    Eligibility: All resident Indians and Hindu Undivided Families (HUFs) are eligible to open a fixed deposit account. Eligibility: All resident Indians and Hindu Undivided Families (HUFs) are eligible to open this account. RD accounts can also be opened for minors by their parents or legal guardians.
    Compound Interest and Impact of Compounding Frequency: Interest on investments made in a FD compounds, and earns interest on the new balance after each compounding. The following formula explains this further: Where:
    A = Final Amount that will be received P = Principal Amount. r = Annual nominal interest rate. n = number of times the interest is compounded per year. t = number of years
    Compound Interest and Impact of Compounding Frequency: Most banks that offer Recurring Deposit usually compound interest on a quarterly basis. Compound interest is interest that is added to the principal amount so that from then on, the interest that has been added also earns interest. This addition of interest to the principal is called compounding. The following formula gives you the total amount one will get if compounding is done: Where: M = Maturity value. R = Monthly instalment. n = Number of quarters. i = Rate of interest/400.
    Renewals and withdrawals of Fixed Deposit Accounts:
    • Rolling over of deposits for another term where term, in which the tenure can differ.
    • Auto-renewal: The tenure of deposit doesn't change, but the interest rate depends on the prevailing interest rate at the time of renewal.
    • Deposits can be encashed at maturity.
    • Premature withdrawals are subject to penalties.
    • Amounts being withdrawn above Rs.20,000 must be transferred to the depositors savings bank account.
    • Amounts being withdrawn below Rs.20,000 can be taken in cash.
    • For sweep-in facility and flexi-deposits, withdrawals are allowed on the interest accrued by the FD, the balance will then be held as a new deposit.
    • No withdrawals are allowed for a minimum of 5 years in the case of tax-saving deposits.
    Renewals and withdrawals of Recurring Deposit Accounts:
    • During the premature closure of the RD for reinvestment in a term deposit, interest will be paid to the account holder without reducing interest rate by 1% (as penalty).
    • If the account holder does not stay with the bank after prematurely closing the account, the interest rate will be (whatever the interest rate was, minus 1% as penalty).
    • Partial withdrawals are not allowed for RDs, but some banks offer a loan facility against the RD, where the RD must be pledged as collateral.
    • Premature withdrawals are possible, but the rate of interest will be less than the base rate (which is around 8.40%).
    Nominations under Fixed Deposit Schemes:
    • A nominee is the person named to receive the funds accrued in a particular FD upon the depositor's death.
    • Nominee details required: Name, age, address, relationship with depositor, details of legal guardians.
    • Only one nominee per deposit account.
    • Proof of depositor's death required to claim funds.
    Nominations under Recurring Deposit Schemes:
    • A nominee is the person named to receive the funds accrued in a particular RD upon the depositor's death.
    • Nominee details required: Name, age, address, relationship with depositor, details of legal guardians.
    • Only one nominee per deposit account.
    • Proof of depositor's death required to claim funds.
    Loan against Fixed Deposit
    • Loans can be availed by keeping your FD as collateral.
    • Loans are given as an alternative to those who need funds, but do not wish to break the deposit account prematurely.
    • Most banks allow for loans in the range of 70% - 90% of the deposit value.
    Loan against Recurring Deposit
    • Loans can be availed by keeping your RD as collateral.
    • Loans are given as an alternative to those who need funds, but do not wish to break the deposit account prematurely.
    • Banks offer loans for up to 90% of the deposit value.
    Income Tax on FD
    • Income on FDs is taxed as per the depositors tax slab.
    • Interest on FDs is calculated on an annual or cumulative basis, but it's taxed on an accrual basis - revenue is recognised when earned and expenses are recognised when incurred.
    Income Tax on RD
    • Income on RDs is taxed as per the depositors tax slab.
    • No TDS, but the investor needs to include the interest accrued during the year in the IT return.

    So which one should you invest in? A fixed deposit or a recurring deposit?

    It all depends on your needs. A fixed deposit account earns interest in a compounding manner on the initial lump sum deposited. The entire amount earns money for 1 year, but in the case of recurring deposits, the first instalment earns interest for 12 months, the second for 11 months, the third for 10 months, and so on until the end of the deposit term.

    In real time, you make more money with a fixed deposit (As illustrated by the below example), but it does not have the flexibility of a recurring deposit account in terms of being able to deposit smaller amounts as and when they become available to you.

    Example:

    Particulars Fixed Deposit Account Recurring Deposit Account
    Amount invested Rs.24,000 (lumpsum) Rs.2,000 (per month for 12 months)
    Interest rate per annum 9% (compounded quarterly) 9% (compounded quarterly)
    Total annual interest earned Rs.2,234. Rs.1,195.
    Total account balance after one year Rs.26,234. Rs.25,195.

    The difference in total income between Fixed Deposit and Recurring Deposit Accounts is Rs.1,039 – as can be seen in the above example. Both types of accounts have their own benefits and drawbacks, but the bottom line is that you earn more with a Fixed Deposit Account (even though the Recurring Deposit Account allows you to stagger your investments in smaller equal portions).

    Perfect Fixed Deposits Deals for you

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    Fixed Deposit vs Recurring Deposit Reviews

    • SBI Fixed Deposit
      "Good support"
      0.5 5.0/5 "Blown Away!"
      I have chosen my fixed deposit scheme from State bank of India because I'm maintaining my salary account with them and they provided rate of interest is fine for me. I have invested the money of Rs. 2.75 lakhs. There is a locking period of 45 days. They are giving interest rate of 4.5%. Overall, I'm satisfied with their services.
      Was this review helpful? 0
      , namakkal
      Reviewed on Jan 18, 2020
    • Kotak
      Kotak Fixed Deposit
      "Good App"
      0.5 5.0/5 "Blown Away!"
      I have been investing the money of Rs. 3 lakhs for the fixed deposit. I have selected Kotak mahindra bank for the FD because their net banking facility is very different when i compared to other. I can access everything regarding the account hence its easy to handle the transactions. I'm not sure about the interest rates. 7 months before, i have invested the money.
      Was this review helpful? 4
      , bangalore
      Reviewed on Jan 08, 2020
    • Kotak Fixed Deposit
      "Excellent Services"
      0.5 5.0/5 "Blown Away!"
      Its because of the competitive interest rates, i have selected the Fixed deposit in Kotak Mahindra bank. I have invested the fixed deposit 1.5 years ago and there is a lockin period of 5 years. They have invested the amount of Rs. 7.5 % and the employees are helpful in the branch.
      Was this review helpful? 1
      , mumbai
      Reviewed on Jan 08, 2020
    • Axis Bank Fixed Deposit
      "Good Savings scheme"
      0.5 4.0/5 "Great!"
      I have a Fixed deposit in Axis bank. I have invested the money of Rs. 10000 for two FDs. There is a lockin duration of 1 year. They are giving a interest rate of 7%. Through net banking, i have activated this Fixed deposit. There is no tax benefits available. Axis bank service has been good. Overall, I'm happy about their services.
      Was this review helpful? 3
      , kolkata
      Reviewed on Dec 31, 2019
    • Oriental Bank of Commerce Fixed Deposit
      "Good Scheme"
      0.5 5.0/5 "Blown Away!"
      Since last 15 years, i have a account with Oriental bank of commerce thats the reason i have invested the money in fixed deposit with the same bank. I have invested the amount of Rs. 11 lakhs. They are giving the interest rate of 6.5%. There is no locking period but i have chosen the duration of 1.5 years. There is no additional charges deducted for this fixed deposit.
      Was this review helpful? 11
      , bulandshahr
      Reviewed on Dec 03, 2019
    • Post Office Fixed Deposit
      "Good Service"
      0.5 4.0/5 "Great!"
      Interest rate is very low in Indian post office Fixed deposit scheme because they are providing only 8.5%. I have chosen this office because of the child benefits. I have invested the money of Rs. 1.5 years. Its 3 years lock in period. Overall, I'm satisfied with the service provided by post office employees.
      Was this review helpful? 25
      , parvathipuram
      Reviewed on Dec 03, 2019
    • SBI Fixed Deposit
      "Good bank for Fixed Deposit"
      0.5 4.0/5 "Great!"
      I have invested the money in SBI for a fixed deposit and based on my wife recommendation i have chosen it. They are providing the interest rate of 7.25%. They have option to select the lock in period in that i have chosen 5 years. We had visited their branch and the response was good.
      Was this review helpful? 23
      , mumbai
      Reviewed on Nov 12, 2019
    • HDFC Bank Fixed Deposit
      "Good one"
      0.5 4.0/5 "Great!"
      Its easy accessible and to redeem so that i have invested the money in Fixed Deposit with HDFC BANK. I have invested the money of Rs. 2.5 lakhs and they have provided me a interest rate of 7.5%. There is no locking period. I didn't got any additional charges till now.
      Was this review helpful? 10
      , hyderabad
      Reviewed on Nov 12, 2019
    • Post Office Fixed Deposit
      "Safety deposit"
      0.5 5.0/5 "Blown Away!"
      I have paid the money of Rs. 4.5 lakhs as a fixed deposit in the Indian post office. For the safety purpose, i have chosen the post office account. They are offering me a interest rate of 7.9%. There is a lockin period of 5 years. If i withdraw the money in 1 year, they will reduce the interest rate of 2% and after 3 years, its 1%.
      Was this review helpful? 57
      , jaipur
      Reviewed on Nov 08, 2019
    • Central Bank of India Fixed Deposit
      "Good Bank"
      0.5 4.0/5 "Great!"
      Interest rates are less in Central Bank of India so I had taken a fixed deposit. I have invested the money of Rs. 1 lakh in my wife's name. Branch is near from my place so I have chosen this bank. Yearly once, I get the money of Rs. 6,765 for the interest. There is a locking period of 1 year.
      Was this review helpful? 4
      , tirupur
      Reviewed on Nov 06, 2019
    • ICICI Bank Fixed Deposit
      "Customer centrice & User friendly app"
      0.5 4.0/5 "Great!"
      I am doing Fixed Deposit with ICICI BANK and its been around 5years. They haven't been paying good interest and its more or less same like other banks as I used to hold my salary account with ICICI, I have decided to be with one bank. There is no locking period and its flexible. They do give good support and the app is user friendly. Even deposit account can be opened through i-mobile or net banking itself.
      Was this review helpful? 8
      , nasik
      Reviewed on Oct 15, 2019
    • SBI Fixed Deposit
      "Good"
      0.5 3.0/5 "Satisfactory"
      I had a Fixed Deposit in State Bank of India, I have completed the tenure before 3months ago. I have no issues with the customer service. They are given me 7% interest rate for 2years. There is no profit and processing fee. I got an online access, where I can check the interest rate anytime on the YONO app or else SBI online.
      Was this review helpful? 17
      , tirupati
      Reviewed on Oct 15, 2019
    • SBI Fixed Deposit
      "Interest charges are good. "
      0.5 3.0/5 "Satisfactory"
      I have invested some money through FD. My salary account is in SBI so i have a zero ATM charges and the limit is not actually set by SBI. They do have short term FDs which is pretty good. I have invested the money of Rs. 60000 and the interest rate is 10.01% for the tenure period of 16 months. There is no lockin period. There is no hassle to getting the money back.
      Was this review helpful? 24
      , kolkata
      Reviewed on Oct 01, 2019
    • Dena Bank Fixed Deposit
      "Good plan for senior citizen"
      0.5 2.0/5 "Expected more"
      I have invested the money in Dena bank through Fixed deposit and the growth is not that much good. They are not taking any hidden charges. Only because of the Government undertaken bank, i have selected them. They are providing a interest rate of 6% per annum. I have invested the money of Rs. 2 lakhs. There is a lockin period of 1 year.
      Was this review helpful? 8
      , new delhi
      Reviewed on Sep 24, 2019
    • Axis Bank Fixed Deposit
      "Interest should be increased for FD"
      0.5 3.0/5 "Satisfactory"
      I have opt for fixed deposit for the tax saving purpose because I have chosen five years tenure with AXIS Bank, still its going on. Only once I Invested my money it has the locking period of five years. I have option to check my transactions through mobile app. But I have concern about the interest rate is very lesser for this FD.
      Was this review helpful? 11
      , hyderabad
      Reviewed on Sep 19, 2019
    • SBI Fixed Deposit
      "FD process should be simpler"
      0.5 1.0/5 "Really Bad"
      I had fixed deposit with SBI then I withdrawn the amount, I done Rs. 3 lakhs of investment on my daughter name then I taken the liquidity to purchase the land, at the time I struggled a lot to take that money because the process was difficult to withdrawn the money after seven months of tenure.
      Was this review helpful? 27
      , madurai
      Reviewed on Sep 03, 2019
    • Union Bank of India Fixed Deposit
      "Not good"
      0.5 3.0/5 "Satisfactory"
      I had a Fixed Deposit with Union Bank of India and its closed 18 to 19 months due to personal reasons. I am doing investment but my experience is not good with FD account. In my home town, there is no other banks so just decided to go with this bank. The returns are good.
      Was this review helpful? 10
      , bangalore
      Reviewed on Aug 28, 2019
    • HDFC Bank Fixed Deposit
      "Good to go with HDFC"
      0.5 5.0/5 "Blown Away!"
      I have one FD with HDFC, I deposited Rs. 1 lakh, I was opt for 45 days of tenure. Finally I got 6.25% of interest for 45 days. It won't cover the tax, if we need tax benefits we should go for five years term. I can track the details through netbanking, on the maturity date the amount credits automatically in the account. Even the notification can customized.
      Was this review helpful? 23
      , bangalore
      Reviewed on Aug 27, 2019
    • HSBC Bank Fixed Deposit
      "wrong calculation of interest rates"
      0.5 0.5/5 "Unacceptable"
      HSBC staff wrongly pre closed my fixed deposit .. and calculated the interest rates wrongly and when asked them for clarification never got back .. even after following up with them repeatedly for more than 3 months.. would highly recommend not using their services.
      Was this review helpful? 9
      , visakhapatnam
      Reviewed on Aug 24, 2019
    • SBI Fixed Deposit
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      I do have a Fixed deposit account with SBI and it was carried out by Mom and even I have account for my daughter. Its still running and they have Google application separately to access online. The returns are good. I am doing monthly investment and it was opened quite a long may be 4 years.
      Was this review helpful? 24
      , ahmedabad
      Reviewed on Aug 23, 2019
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