Fixed Deposit Vs. Recurring Deposit, name your choice

FD vs RD-new

In present day India, individual investors have a lot of investment avenues like equity, bonds, mutual funds, real estate, etc. However, many individuals in India still prefer bank deposits as a prominent investment technique. Bank deposits in this context refer to ‘term deposits’ which depositors keep with banks for a specified time period. These term deposits are categorized into Fixed Deposits (FDs) and Recurring Deposits (RDs). FD is the lump-sum amount which individuals deposit in a bank for a specified tenure. On the other hand, in RD, individuals invest a specified amount over a period of time in the bank.

One of the points noteworthy at this juncture is that both FDs and RDs earn interest. However, most individuals are at sixes and sevens while choosing to deposit in FDs or in RDs. Many research scholars in India have penned a plethora of articles in this sphere. Besides this, numerous universities too have conducted research in the said area. These research findings state that depositors prefer both FDs and RDs considering various aspects such as their monetary requirement, the time frame for which the money can be invested, their required rate of returns, etc. Some of these factors are discussed below.

Income Level: it is detrimental while selecting RDs or FDs as an investment option. For instance, if an individual has recently started a new job, then it may not be feasible to save a substantial sum of money. Such individuals prefer to invest in RD as it helps them to decide a specific amount of money that has to be saved over a period of time. On the other hand, individuals already earning a sizeable income over a period of time would prefer to opt for FD as they would be lured by the higher interest amount earned. One of the primary objectives behind depositing money in FDs and RDs may be wealth accumulation.

Returns Earned: returns earned refer to the accumulated interest amount that a depositor will receive after the maturity of the deposit. In this case it is important to mention that fixed deposit interest amount is higher compared to recurring deposit interest amount in case the deposit amount, interest rate, and tenure of the deposit is the same. This can be explained with an example:

Ashish has got two investment options. He can either invest Rs24,000 in a FD for a period of 12 months at an interest rate of eight percent per annum, or he can invest Rs2,000 in a RD for a period of 12 months at an interest rate of eight percent per annum. How does Ashish make a profitable choice of investment?



Amount Invested

Rs24,000 lump-sum

Rs2,000 per month

Rate of Interest



Investment Tenure

12 Months

12 Months

Net Maturity Proceeds



Interest Received at Maturity



Net Extra Interest Earned

Rs1,978 – Rs1,059 = Rs919

From the above example, it is concluded that Ashish should invest in FD in order to earn higher interest amount.

Hence, it is important to analyze various aspects before deciding to invest in FD or RD. These aspects can have an impact on the present consumption as well as on future savings of individuals. These criteria should be borne in mind before making a trade-off.

There are several online programs that are offered by various institutes which deal with investments in bank deposits. ITM University Online, a part of ITM – Group of Institutions, one of the premier institutions in India enables you to get an insight into the vast expansive features of bank deposits. This will help you to make the right choice at the right time. The knowledge will surely be fruitful to students as well as working professionals who wish to make profitable investments with high returns in their personal or professional life.