Difference Between Recurring Deposit and Fixed Deposit

One of the most preferred term deposit schemes in India, Fixed Deposit (FD), is offered by banks and non-banking financial institutions (NBFCs). These schemes allow you to deposit a lump sum at a time and save it for a specific tenure. Upon maturity the deposit is paid out with interest earned during the tenure. Individuals can opt for a regular interest payout option depending upon their convenience and bank policy, but withdrawal of FD amount is only allowed after the lock-in period. 

 Common Types of Fixed Deposit Schemes 

The following are the types of fixed deposit schemes: 

1. Regular FDs: 

1. Offers high interest rate 
2. The investment form is regular 
3. Offers predetermined interest rate 
4. Investment can be done for a particular time period 

1. Standard FDs: 

1. Offers high interest rate compared to other traditional FD 
2. Offers fixed tenure 
3. Deposit tenure starts from seven days to 10 years 
4. Offers predetermined rate of interest 

1. Senior citizen FD: 

1. Offers flexible tenure  
2. Applicable for individual above 60 years of age 
3. Interest rate offered by Senior Citizen FDs are higher than other FDs 

1. Cumulative Fixed Deposit: 

1. FD scheme matures from one to five years 
2. Does not provide regular interest payment 
3. Interest paid out only after maturity 
4. Interval-based interest not eligible for users 

1. Non-Cumulative Fixed Deposit: 

1. Interest is paid out at regular intervals 
2. Ideal for those who are looking for regular income 
3. The tenure of these FD schemes ranges from one to five years 
4. Decreased amount will be paid at maturity in case of regular interest payout 

1. Company deposits: 

1. Offered to those companies with good creditworthiness 
2. Offers high interest rates by NBFCs (Non-Banking Financial Companies) 

1. Bank Deposit: 

1. The interest rate offers by NBFCs are more than he rates of bank deposits 
2. Bank offers these schemes to the customer along with savings account 

1. Tax saving FDs: 

1. Lump sum deposit can be done one time 
2. Lock in period is five years 
3. Ensures tax exemption up to Rs.5 lakh per annum 
4. Most of the banks offers tax saving FDs 

1. NRIs FDs: 

1. Offers fixed tenure 
2. Offers high interest rate compared to traditional FD scheme 
3. This FD scheme is applicable for OCI (Overseas Citizen of India), PIO (Persons of Indian Origin) with NRO (Non- Resident Ordinary) account, and NRIs 
4. The applicable payment mode is NEFT (National Electronic Fund Transfer) or RTGS (Real Time Gross Settlement) from NRO account 

What is a Recurring Deposit? 

Recurring deposit (RD) is also a term deposit scheme which is preferred by most Indian citizens and is offered most banks and NBFCs. These deposit schemes enable users to save their money on a monthly basis for a specific duration as selected during account opening.   

Common Recurring Deposit Schemes

The following are the different types of recurring deposits: 

    Regular recurring deposit account:

1. Depending upon the tenure selected and amount deposited, the interest rates are determined 
2. Individual above 18 years of age with regular income source can start this scheme 
3. Offers high interest rates 
4. Recurring deposit accounts for senior citizens: 

1. These schemes are designed especially for senior citizens who are above 60 years of age 

1. The interest rates earned from these schemes are higher than regular RDs 

1. Recurring deposit account for minors: 

1. Minor should be below 18 years of age 
2. The RD account should be opened by the guardian or parent of the minor 

1. Recurring deposit account for NRI: 

1. Applicable only for NRIs 
2. High interest rates are offered on these RD schemes 

Major Difference Between FD and RD 

When we talk about RD and FD, there is one single important difference that you must be aware of, before we talk about other differentiating points. While both RD and FD runs over a tenure, FD investors can deposit an amount once while RD investors must deposit a fixed amount at regular intervals.

Fixed Deposit - 

1. Customers who opt for fixed deposit will have to choose a tenure, which usually ranges from 7 days to 10 years, and must deposit an amount once. The interest on the amount will be credited to the investor's account on a monthly or a quarterly basis.

Recurring Deposit -

1. When it comes to recurring deposits, investors can deposit a fixed amount every month and can earn interests. The interest is paid along with the capital at maturity.

Recurring Deposit (RD) vs Fixed Deposit (FD)

How to Open FD in India - Online and Offline Options

The following are the steps to open FD through online and offline mode: 

Online: 

1. Log in to the website of the bank’s official portal 
2. Go to fixed deposit section on the bank’s website 

1. Fill in required information 
2. Submit the form 
3. Complete the Know Your Customer (KYC) process for opening an FD account with the bank, if you are new customer 

Offline: 

1. Visit the nearest branch of the bank where you want to open an FD 

1. Obtain the application form for FD 
2. Fill in the application form with required information and submit it to the concerned authority 
3. To activate the FD, deposit the cash and obtain the deposit receipt 
4. Submit the Know Your Customer (KYC) documents and a passport-sized photograph and complete the FD account opening process 

How to Open RD in India - Online and Offline Options 

The following are the steps to open RD through online and offline mode: 

Online: 

1. Log in to the internet banking portal of the bank where you want to open the RD account 
2. Click on ‘Investment’ or ‘Savings’ option to open the RD account 
3. Select the type of RD account and enter the deposit amount and the tenure 

1. Specify the date of monthly deposit 
2. Click on ‘Submit’ or ‘Proceed’ to complete the process 

Offline: 

1. Visit the nearest branch of the bank where you want to open the RD account 
2. Obtain the application form for opening the RD account 

1. Fill in the required details as mentioned 
2. Submit the form along with the deposit amount to activate the account 
3. The bank will process the application and will intimate once the account gets activated 

RD Rates for Some Major Banks 

The following are some of the major banks with their respective RD rates: 

FD Rates for Some Major Banks 

The following are some of the major banks with their respective RD rates: 

What Should You Choose RD or FD?

For people who do not have a lump sum to invest in a FD, but can afford a small portion of investment amount from income every month, a recurring deposit (RD) seems to be the right fit. Both RD and FD are best suited for risk averse investors who are mostly in the lower tax slab. Use an online recurring deposit calculator to see what suits best for the amount that you can invest. Although one single investment product cannot meet all needs, a RD is preferred by many because it puts considerably less financial strain and gives almost the same returns as FD.

A good credit score can help you secure lower interest rates on loans and credit cards.

Get Free Credit Score