What are Fixed Deposit vs Recurring Deposit?

The two most widely used bank savings methods in India.

In 2026, Fixed Deposits (FD) and Recurring Deposits (RD) continue to remain the preferred savings options for households that want stable and predictable returns. Unlike market investments, bank deposits protect the principal amount and provide a known maturity value in advance.

RBI deposit statistics report data shows that total deposits in India crossed ₹253.77 lakh crore by December 2025. Out of this, time deposits — which include FD and RD — alone formed ₹220.49 lakh crore, meaning a majority of savings still go into traditional deposits.

• 59% – Savings held in term deposits
• 10.6% – Deposit growth FY 2024-25
• 60.2% – Household investors
• 72.7% – Deposits earning 7%+ interest

1. Fixed Deposit (FD)

A Fixed Deposit is a one-time lump sum investment kept in a bank for a chosen tenure. The bank locks the interest rate at the time of opening, and it normally stays unchanged until maturity.

Practical Example: If ₹1,20,000 is invested for 2 years at 7.5%, the entire ₹1,20,000 earns interest from the first day itself. Because the full amount works for the complete period, FD usually produces higher maturity than gradual savings.

FD rates depend on RBI monetary policy and bank liquidity conditions. You can check the latest FD rates here.

• Tenure – It is usually Available from 7 days to 10 years.
• Withdrawal – Premature withdrawal allowed with a small penalty.
• Loan Facility – In India, most banks usually provide loans up to 90%–95% of the FD value.
• 2026 Trend – Rates relatively stable due to steady policy rates.

FD is commonly used for retirement funds, bonus income, property sale proceeds, and emergency reserve parking.

2. Recurring Deposit (RD)

A Recurring Deposit is a monthly savings plan where a fixed amount is deposited every month for a selected tenure. Instead of investing at once, the savings grow gradually over time.

Practical Example: Saving ₹5,000 every month for 5 years means a total investment of ₹3,00,000. Early instalments earn interest for many years, while later instalments earn interest for a shorter duration. Therefore, RD maturity normally remains slightly lower than FD for the same total invested amount.

• Investment Method – It is a fixed monthly instalment similar to SIP.
• Interest Rates – Generally, it goes around 6.0%–7.5% in major banks.
• Accessibility – You can start with a small amount, such as Rs. 100
• Post Office RD – 5-year scheme, about 6.7% interest.

RD works best for salaried earners who want disciplined saving for education, travel, or planned purchases.

Difference Between FD and RD (FD vs RD)

Both are safe bank deposits. The real difference is not safety; it is how the money is deposited and how long each rupee stays invested.

Core Understanding

• FD = you already have the full money and want it to grow safely.
• RD = You don’t have the full money yet, so you slowly build it month by month.

Think of it like this: FD is filling a water tank completely at once — it starts giving full benefit immediately, and RD is filling the tank every month — steady and safe, but growth is slower.

Practical Tip

If you already have the full amount available, choosing RD instead of FD usually gives a smaller final maturity value. But if you are saving from salary, FD planning often breaks because people withdraw early. Many successful savers first build a habit using RD, and later move to FD once they accumulate a lump sum.

How FD and RD Interest Rates Actually Work (2026)

Both Fixed Deposit (FD) and Recurring Deposit (RD) give guaranteed returns. But the important point is — the interest rate may look similar, yet the calculation method is different.

In India, most banks use quarterly compounding. This means the bank adds interest to your deposit every few months, and then the next interest is calculated on the new, higher amount. So your money earns interest on interest.

1) Fixed Deposit (FD) Interest Calculation

In a Fixed Deposit, the bank calculates interest on the entire amount from the very first day. Because the full money remains inside the bank for the whole tenure, compounding works strongly.

• Cumulative FD
  • Interest is added back to the deposit every quarter.
    • Your maturity grows faster because interest itself starts earning interest.
• Non-Cumulative FD
  • Interest is not reinvested.
  • alternatively, the bank pays it monthly or quarterly as regular income (often used by retirees).

Let Understanding: Every rupee stays invested for the full duration. That is why, if the total invested money is the same, an FD usually produces the highest maturity value.

2) Recurring Deposit (RD) Interest Calculation

In a Recurring Deposit, the bank does not treat it as one big deposit. Each monthly instalment is considered a separate small FD.

• The first instalment earns interest for the entire tenure
• The second earns slightly less
• The last instalment earns interest only for a short time

So the money enters slowly, and later instalments get less time to grow.

Important: RD does not have a lower interest rate. It gives lower maturity because many instalments stay invested for a shorter period.

Typical Interest Rate Ranges (2026)

Tenure and Investment Limits

Important Rules About Rates

• If you close FD or RD early, the bank pays interest only for the actual time completed, and a small penalty may apply.
• Bank deposits are considered safe savings options.
• Deposits are insured up to ₹5 lakh per bank under deposit insurance protection.

FD and RD Charges & Tax — Explained

Many people think FD and RD are taxed differently. Actually, the government does not see them as two different investments.

For tax purposes, both are simply bank interest income. No matter where the interest you earn, from FD or RD or both, the Income Tax Department adds it to your yearly income (salary, shop income, pension, farming-related taxable income, etc.). After that, the tax is calculated according to your slab.

First Clear One Confusion

Tax and TDS are not the same thing.

• Tax = what you actually owe to the government
• TDS = small advance tax, the bank cuts and deposits for you

The bank is not punishing you. It is only sending part of your tax in advance. When you file ITR, the system adjusts it. Sometimes you still pay a little more. Sometimes you even get a refund.

Basic Rules

Important: If you have multiple accounts in the same bank, the bank combines interest from all branches before checking the ₹50,000 limit.

What Actually Happens (Real Example)

Suppose you keep ₹5,00,000 for 5 years at 7%

Why does FD earn more? It’s not because the FD rate is higher. Because time is higher.

• In FD, every rupee works for a full 5 years.
• In RD, the last few instalments work only for a few months.

So the bank did not pay less interest. The money simply did not get enough time to grow.

People often open a big FD, thinking, “I will not touch this money.” Then an emergency comes — medical, wedding, crop issue, business need — and the FD gets broken in 8–10 months. After the penalty and rate change, profit becomes very small. RD actually helps many families more because it builds habits. Small monthly saving continues without stress.

FD or RD — Which Should You Choose?

There is no “best” option for everyone. The real question is very simple: Do you already have the money, or are you still trying to save it? That single answer usually decides between FD and RD.

1. Fixed Deposit (FD) is suitable when

• A lump sum amount is already available
• Bonus, maturity proceeds, or sale money has been received
• A higher maturity value is the priority
• Regular monthly interest income is needed
• Retirement or near-retirement safety is the goal

FD is mainly for protecting existing savings.

2. A Recurring Deposit (RD) is suitable when

• Savings come from a monthly salary or business income
• Building a savings habit is important
• Planning for future expenses (fees, travel, purchase, repairs)
• A large one-time investment is not possible
• Financial planning has just started

RD is mainly for building savings slowly.

Example

Goal: create ₹1,20,000 in 5 years at about 7.5%

What is an FD & RD Calculator?

An FD (Fixed Deposit) Calculator and an RD (Recurring Deposit) Calculator are simple planning tools that show how much savings may grow before actually putting money in the bank. Instead of sitting with a notebook and trying to calculate compound interest, the calculator immediately estimates the future value based on deposit amount, interest rate, and time period.

The purpose is not to replace the bank. It helps in deciding how much to save and for how long before opening the deposit.

1. FD Calculator

Used when a one-time lump sum amount is invested. It shows how that single amount grows with compounding interest over time.

• Details You have to put –
  • Deposit amount
  • Interest rate
  • Investment tenure
• Output
  • Maturity value
  • Total interest earned

In short, it answers: “If this money is kept today, what amount will come back on maturity?”

2. RD Calculator

Used when saving a fixed amount every month. It estimates how monthly deposits gradually accumulate during the chosen period.

• Details You have to put –
  • Monthly installment
  • Interest rate
  • Number of years
• Output
  • Total invested amount
  • Maturity value

Here, the idea is: “If a small amount is saved regularly, what total fund will be created later?”

Why People Use These Calculators

Small changes in tenure or amount can change the maturity value noticeably. By checking beforehand, planning becomes easier — for example, school fees, a vehicle purchase, a home repair, or an emergency fund.

How the Easemoney FD vs RD Calculator Works

The calculator follows the same practical method banks normally use in India:

1. FD maturity is calculated using quarterly compounding
2. RD treats each monthly instalment as a separate small deposit
3. Early instalments earn interest longer, later instalments shorter
4. Comparison mode converts a lump sum into an equivalent monthly saving to show the real difference

FAQs For You