When it comes to safe and reliable investment options in India, Fixed Deposits (FDs) and Recurring Deposits (RDs) are among the most popular choices. Both are offered by banks, post offices, and financial institutions, and both guarantee assured returns. However, choosing between FD and RD depends on your income pattern, financial goals, and liquidity needs.
In this guide, we’ll break down the differences between FDs and RDs, their benefits, drawbacks, and which one is better for you.
What is a Fixed Deposit (FD)?
A Fixed Deposit is a lump-sum investment option where you deposit a certain amount for a fixed tenure at a predetermined interest rate. The interest is compounded (quarterly, half-yearly, or yearly) and paid at maturity or at chosen intervals.
Minimum deposit: ₹1,000 (varies by bank)
Tenure: 7 days to 10 years
Interest payout: Monthly, quarterly, annually, or at maturity
Ideal for: People with surplus money who can invest a lump sum
What is a Recurring Deposit (RD)?
A Recurring Deposit is a savings option where you invest a fixed amount every month for a fixed tenure. At maturity, you get your principal plus compounded interest.
Minimum deposit: ₹100 per month (varies by bank)
Tenure: 6 months to 10 years
Interest payout: At maturity
Ideal for: Salaried individuals or those with regular income
FD vs. RD: Key Differences
| Feature | Fixed Deposit (FD) | Recurring Deposit (RD) |
|---|---|---|
| Investment Type | Lump sum | Monthly installments |
| Minimum Deposit | ₹1,000 (approx.) | ₹100 (approx.) |
| Tenure | 7 days – 10 years | 6 months – 10 years |
| Liquidity | Premature withdrawal allowed (with penalty) | Premature withdrawal allowed (with penalty) |
| Best for | Investors with lump sum funds | Salaried individuals with regular savings |
| Returns | Higher (due to compounding on full amount) | Slightly lower (compounding applies gradually) |
Benefits of Fixed Deposits (FD)
Guaranteed returns at higher rates than savings accounts
Flexible tenure options
Loan facility against FD
Suitable for both short-term and long-term goals
Benefits of Recurring Deposits (RD)
Encourages disciplined monthly savings
No need for a lump sum
Low entry barrier (start with as little as ₹100/month)
Safe investment with assured returns
Which is Better: FD or RD?
Choose FD if you have a lump sum and want higher returns with flexible payout options.
Choose RD if you earn a salary and want to build savings gradually without financial strain.
👉 In short:
FD = Best for wealth creation with lump sum investment.
RD = Best for developing a saving habit with small monthly contributions.
Frequently Asked Questions :
1. Which gives higher returns, FD or RD?
FD usually gives higher returns because the full amount is invested upfront and earns interest for the entire tenure.
2. Can I withdraw FD or RD before maturity?
Yes, but banks charge a penalty for premature withdrawal.
3. Is the interest on FD and RD taxable?
Yes, interest earned on both FD and RD is taxable as per your income tax slab.
4. Can I get a loan against FD or RD?
Most banks offer loans against FD, and some also allow loans against RD.
5. Which is safer – FD or RD?
Both are equally safe, provided you invest in a government bank, post office, or a reputed financial institution.
Published on : 28th August
Published by : SMITA
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed
https://play.google.com/store/apps/details?id=com.vizzve_micro_seva&pcampaignid=web_share