Monthly Interest Payout Fixed Deposit (FD)
A Monthly Interest Payout Fixed Deposit (FD) pays out your accumulated interest every month instead of at maturity. It is offered by major Indian banks for tenors from one month to five years, with rates generally between 2.75% p.a. and 7.75% p.a. Senior citizens usually earn about 0.50% p.a. more than the regular rate.
The tenor typically ranges from 1 month to 5 years. The deposit will be held by a fixed interest rate that can be either received by the account holder in regular intervals i.e. fortnightly, monthly, quarterly or yearly basis or upon maturity.
For instance, an account holder who has opted for a monthly interest payout, will receive a Fixed Deposit monthly income. FD schemes are offered by institutions like banks, Non-Banking Financial Companies, building societies or credit unions.
FD Trends and Market Insights in India
The risk-averse nature of the Fixed Deposit scheme combined with an assurance of high returns makes it a common investment choice in India.
The rates of interest typically range from 4%-8% and are priced differently by each financial institution based on the tenor.
The lower limit of deposit that can be parked is usually Rs.1,000, while the upper limit varies with each institution.
Interest Rates on FD Offered by Indian Banks:
The following enlists the interest rates per annum of FD as of September 2026 (for deposits below Rs.1 crore) offered by a few popular banks in the Indian economy:
Name of the bank | Regular Interest Rates (p.a.) | Senior Citizen Interest Rates (p.a.) | Minimum Limit for Deposit |
RBL Bank FD | 3.50% to 7.20% | 4.00% to 7.70% | Rs.5,000 |
Kotak Mahindra Bank FD | 2.75% to 7.20% | 3.25% to 7.30% | Rs.5,000 |
Canara Bank FD | 3.00% to 6.60% | 3.00% to 7.10% | Rs.1,000 |
City Union Bank FD | 4.00% to 7.25% | 4.00% to 7.50% | Rs.100 |
HDFC Bank FD | 2.75% to 6.60% | 3.25% to 7.10% | Rs.5,000 |
State Bank of India FD | 3.05% to 6.40% | 3.55% to 6.90% | Rs.1,000 |
Note: Interest rates updated on 01 September 2026.
How to Calculate Fixed Deposit Monthly Interest Payout?
A majority of the banks that offer Fixed Deposits have an online portal which enables a potential investor to calculate an estimate of the monthly interest payout that they could obtain.
The following steps could be followed to use the FD monthly payout calculator:
- Visit the online site of the bank where you wish to open a Fixed Deposit account.
- Click on the Fixed Deposit option from the services enlisted.
- If the page does not already contain the FD calculator, click on the option that leads you to the calculator.
- Enter the size of the deposit to be made.
- Select the desired tenor.
- Choose the interest payout frequency option as 'Monthly'.
- The calculator would then formulate an estimate of the monthly interest payout corresponding to the bank's interest rates.
Why Choose Monthly Interest FD as an Investment Option?
Fixed Deposit is a popular mode of investment among the general public in India.
The following describes a few features that make FD a profitable investment:
- Unlike the share market, the returns of Fixed Deposits are resistant to the market fluctuations. This makes FDs a safe option for investment.
- An investor gets an estimate of the size of the returns that they would receive upon maturity hence, enabling them to plan their finances across the full tenor of the FD.
- Cumulative FDs are term deposit schemes which accumulate your total interest income to the returns upon maturity. Investors can opt to receive a large sum of money in a single instalment. Investors who would benefit from an amassed surplus in one go could select this scheme.
- Non-Cumulative FDs on the other hand ensure periodic interest payouts to the investors. Individuals who seek out regular intake of cash in addition to their income, could opt for this plan.
- The rollover feature in select FD schemes enable the account holder to reinvest the returns for a new term deposit. This ensures continued growth in savings.
- According to the RBI guidelines, FDs up to Rs.5 lakh are insured under the Deposit Insurance and Credit Guarantee Scheme of India.
- Banks deduct TDS on Monthly Interest Payout FD interest only once your annual interest income from that bank crosses Rs.50,000 for regular depositors and Rs.1,00,000 for senior citizens, per the revised threshold under the Income Tax Act effective from Financial Year 2025-26.
What Happens in case of Premature Withdrawal?
Most of the banks and other financial institutions attach penalty charges on premature withdrawals from Fixed Deposit accounts. There are two variants of FDs viz. FD with an option of premature withdrawal and FD without an option of premature withdrawal. Some banks permit partial withdrawals but not complete withdrawal of the funds before the date of maturity.
For Fixed Deposits with premature withdrawal facility, banks usually obey the following formula:
Rate of interest for premature withdrawal = Rate of interest at the time of investment - 1%
This formula is generally applicable for FDs with sweep-in facility, as well FDs with a periodic interest payout frequency. Hence, preclosure or premature withdrawal could lead to loss in interest income. It is recommended that investors carefully analyse the tenor best suited to their needs while choosing a plan, to avoid premature withdrawals.
Per the Reserve Bank of India's Master Direction on Interest Rate on Deposits, banks must levy premature withdrawal penalties strictly as per a policy approved by their Board of Directors, and these penalty terms must be clearly disclosed to you at the time you open the Monthly Interest Payout FD.
How to Convert Annual Interest Rate to Monthly Interest Rate?
These steps can be followed to convert annual interest rate into monthly interest rate:
- The annual rate needs to be converted from percentage to decimal format (divide the rate by 100)
- Divide the annual rate (the decimal form) by 12
- Multiply the annual rate with the interest amount to obtain the monthly rate
- Convert the monthly rate into percentage by multiplying it with 100
Steps to Break or Close an FD Before Maturity
Fixed Deposit schemes with a premature withdrawal facility can be closed before the date of maturity. Most banks charge a penalty for preclosure of an FD account. An account holder can visit the respective bank and file an application to close the FD. The bank would then process their request and attach the prescribed charges to the account. This would then be followed by transferring the returns to the account holder and returning any documents that were submitted while opening the account. Many banks also offer an online service to close an FD account.
The following steps could be followed to close or break an FD account online:
- Visit the website of the respective bank.
- Enter your credentials such as the username and the password.
- Click on the 'Fixed Deposits' option from the list of services mentioned on the site.
- Select the 'Close account' option.
- From the list of FDs, select the account that you would like to close.
- Cooperate with any verification processes that might be requested to confirm your identity.
- A confirmation message might be sent to your registered mobile number and email address. Proceed to confirm these.
- After deducting the penalty charges, the returns would then be transferred to your savings account.
- Check the updated amount on your account to confirm the receipt of the amount.
Summary
A Monthly Interest Payout FD lets you earn a regular monthly income from your savings while keeping your principal safe from market fluctuations. Compare rates across banks like RBL Bank, Canara Bank, HDFC Bank and SBI in the table above, and use an FD calculator to estimate your monthly payout before you invest. Choose a tenure and bank that best match your income needs and investment horizon.
FAQs on Monthly Interest Payout
1.What is a Monthly Interest Payout Fixed Deposit (FD)?
A Monthly Interest Payout Fixed Deposit (FD) is a term deposit that pays out the interest earned every month instead of at maturity. It suits investors who want a regular monthly income from their savings. Banks, NBFCs, building societies and credit unions all offer this FD variant.
2.What is the tenure for a Monthly Interest Payout FD?
The tenure of a Monthly Interest Payout FD generally ranges from a few months to several years, depending on the bank or financial institution. Most banks set a minimum tenure specifically for the monthly payout option, so check the applicable tenure slab with your chosen bank before investing.
3.How is the monthly payout on a Monthly Interest Payout FD estimated?
Most banks provide an online FD calculator where you can enter the deposit amount, tenure and payout frequency to estimate your Monthly Interest Payout FD returns. Selecting 'Monthly' as the payout frequency shows the estimated monthly income based on the bank's applicable rate. This helps you compare returns before investing.
4.What are the benefits of choosing a Monthly Interest Payout FD?
A Monthly Interest Payout FD is not affected by market fluctuations, unlike equity investments, which makes it a safe, predictable option. It also lets you plan your finances in advance, since you know the size of the payout you will receive each month. Some schemes even offer a rollover facility to reinvest the returns automatically.
5.What is the difference between a cumulative FD and a Monthly Interest Payout FD?
A cumulative FD reinvests the interest and pays it out as a lump sum at maturity, while a Monthly Interest Payout FD pays the interest out every month. Investors who want a large sum at the end of the tenure typically choose a cumulative FD, while those who need regular cash flow choose the monthly payout option.
6.Can I withdraw a Monthly Interest Payout FD before maturity?
Yes, many banks allow premature withdrawal of a Monthly Interest Payout FD, though some only permit partial withdrawal and a few do not allow it at all. Premature withdrawal usually attracts a penalty and may reduce the interest rate applicable to the deposit. Check your bank's specific terms before applying.
7.Does premature withdrawal reduce the interest rate on a Monthly Interest Payout FD?
Yes, premature withdrawal of a Monthly Interest Payout FD typically reduces the applicable interest rate compared with the rate fixed at the time of investment. Banks set this reduction as part of their Board-approved deposit policy, which is disclosed to depositors when the FD is opened. Choosing a tenure that matches your investment horizon helps you avoid this reduction.
8.How do I convert the annual interest rate of a Monthly Interest Payout FD to a monthly rate?
To convert the annual rate of a Monthly Interest Payout FD to a monthly rate, first divide the percentage rate by 100 to get its decimal form, then divide that figure by 12. Multiplying this monthly decimal rate by the deposit amount gives the approximate monthly interest payout.
9.How can I close a Monthly Interest Payout FD before maturity?
You can close a Monthly Interest Payout FD before maturity either by visiting your bank's branch or, in most cases, through its online or net banking portal. The bank verifies your identity, deducts any applicable penalty, and transfers the balance to your savings account. Many banks also send a confirmation message to your registered mobile number and email during this process.
10.Can I take a loan against my Monthly Interest Payout FD?
Yes, most banks let you take a loan against a Monthly Interest Payout FD instead of breaking the deposit early. The loan amount you can avail depends on the bank's policy and the value of the FD. This lets you access funds for short-term needs while your deposit continues to earn interest.
11.Can I reinvest the interest paid out from my Monthly Interest Payout FD?
Yes, you can reinvest the interest paid out from your Monthly Interest Payout FD either into a fresh fixed deposit or into another investment of your choice. This flexibility lets you put your regular payout to work rather than letting it sit idle. Speak to your bank about the reinvestment options it offers.
12.Can I convert an existing FD into a Monthly Interest Payout FD?
Yes, many banks and financial institutions allow you to convert an existing fixed deposit into a Monthly Interest Payout FD, subject to their terms and conditions. You may need to submit a request at your branch or through net banking to make the switch. Check with your bank on whether any charges apply.
13.Is TDS deducted on the interest earned from a Monthly Interest Payout FD?
Yes, banks deduct Tax Deducted at Source (TDS) on Monthly Interest Payout FD interest once your total interest income from that bank crosses the threshold prescribed under the Income Tax Act for the financial year. You can submit the prescribed declaration form, where eligible, to avoid this deduction if your income is below the taxable limit. Check the current threshold with your bank or a tax advisor.
14.Is a Monthly Interest Payout FD covered under deposit insurance?
Yes, a Monthly Interest Payout FD held with a bank is covered under the deposit insurance scheme run by the Deposit Insurance and Credit Guarantee Corporation (DICGC), subject to the prescribed per-depositor, per-bank limit. This cover applies automatically and gives depositors added protection. Check the current insured limit on the DICGC's official website.
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