In this guide
This guide compares fixed and recurring deposits only: what each one is, how money goes in, how maturity works, flexibility, a worked example, pros and limits, and how to pick between them.
- What an FD and an RD are
- Lump-sum vs recurring contributions
- How maturity works
- A side-by-side comparison and worked example
- How to choose
What is an FD?
A fixed deposit is a single amount you place with a bank or other provider for a chosen term, at an interest rate fixed when you open it. Interest is usually compounded (often quarterly) and paid at maturity, or paid out at regular intervals if you choose that option.
What is an RD?
A recurring deposit is a commitment to deposit the same amount every month for a chosen term. The rate is also fixed at the start. Each instalment earns interest only from the month it is paid, so early instalments earn for longer than later ones.
The main difference: how money goes in
The core difference is timing. With an FD, your full amount earns interest from day one. With an RD, your balance starts small and builds up month by month, so on average the money is invested for roughly half the term.
That is why an FD of ₹1,20,000 earns more interest than an RD of ₹10,000 a month for 12 months at the same rate — not because the FD rate is better, but because the money is invested for longer.
FD vs RD at a glance
The table below summarises how the two products typically compare. Exact terms vary by provider.
| Feature | FD | RD |
|---|---|---|
| How you invest | One lump sum upfront | Fixed amount every month |
| Money working from | Day one, in full | Each instalment's own date |
| Best suited to | Money you already have | Money you save from income |
| Rate | Fixed at opening | Fixed at opening |
| Missed payments | Not applicable | May attract a penalty |
| Early withdrawal | Usually allowed with a penalty | Usually allowed with a penalty |
A worked example
Assume a hypothetical rate of 7% a year, compounded quarterly, for one year. This is an illustration, not a current rate — deposit rates change and differ between providers.
FD: deposit ₹1,20,000 once. At maturity it is worth about ₹1,28,623, so interest is roughly ₹8,623.
RD: deposit ₹10,000 every month for 12 months — the same ₹1,20,000 in total. At maturity it is worth about ₹1,24,621, so interest is roughly ₹4,621. The RD earns less because most instalments are invested for only part of the year.
Have a lump sum? Use the FD Calculator to see its maturity value at your own rate and term.Open the FD CalculatorHow maturity works
On an FD, maturity value is your deposit plus all compounded interest at the end of the term (unless you chose regular payouts). On an RD, maturity value is the sum of all instalments plus the interest each one earned from its deposit date.
Both can usually be renewed or paid out at maturity. Interest on both is generally taxable as income, so post-tax returns depend on your situation.
Saving monthly? Use the RD Calculator to see what your instalments could add up to.Open the RD CalculatorAdvantages and limitations
Each product does a different job well.
- FD advantage: the full amount earns interest immediately.
- FD limitation: needs money you already have; breaking it early usually costs some interest.
- RD advantage: builds a savings habit from monthly income with a small starting amount.
- RD limitation: lower interest for the same total, and missed instalments may be penalised.
- Both: returns are fixed but taxable, and may not beat inflation.
How to choose between them
Start with where the money is coming from. If you hold a lump sum — a bonus, maturity proceeds or savings in a bank account — an FD puts all of it to work at once. If you want to set aside part of your salary each month towards a goal, an RD turns that habit into a fixed plan.
Many people use both: an FD for existing savings and an RD for ongoing saving. For very long-term, tax-advantaged saving, a PPF account is another option — see our PPF vs FD guide, or try the PPF Calculator.
Conclusion
FD vs RD is less about which is better and more about how your money arrives. Lump sum: FD. Monthly savings: RD. Check the current rate from your provider, run both through the calculators, and compare on a post-tax basis.