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6 Things to know before investing in an FD instead of RD!

Posted: 29th December, 2022

Updated: 2nd February, 2023

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A Fixed Deposit (FD) and Recurring Deposit (RD) are the safest investment options in India. One of the significant advantages of investing in an FD and RD is that there are assured returns at a fixed interest rate. Investors can deposit a lump sum of money in Shriram Fixed Deposit or a bank fixed deposit to attain growth at zero risk. A fixed deposit and recurring deposit are safer for investment because they are not market-dependent and provide a higher rate of return throughout the investment tenure.

FD and RD guarantee returns at maturity. However, when comparing FD vs RD, one can find that a fixed deposit offers higher interest rates that help earn higher returns than a recurring deposit. Investors can park their idle funds from savings accounts by opening an FD account with Shriram and reap excellent benefits in the future.

As RD vs FD is the most popular topic when it comes to the choice of a safer investment option, let us discuss the difference between FD and RD and find which is a better option to invest in.


What is a Fixed Deposit?

A fixed deposit is an investment option offered by banks, NBFCs (Non-Banking Financial Companies) and other financial institutions through which investors can grow considerable savings at a fixed interest rate. A fixed deposit is a safer investment option compared to Mutual Funds (MFs), Systematic Investment Plans (SIPs) and Stocks. An FD assures higher returns at a fixed interest rate, offers additional FD interest rates for senior citizens, grants regular payout options, allows loans against an FD and does not expose FD funds to market risks.

Generally, the tenure of a fixed deposit ranges from 7 days – 10 years. However, most banks and NBFCs commonly offer a fixed deposit for 5 years. The FD interest rates remain stable throughout the tenure, and investors can use an online FD calculator to calculate the exact maturity amount.

Shriram Fixed Deposit offers an attractive interest rate of up to 8.75% per annum, including the 0.50% interest rate for senior citizens.

Also Read: Top 6 Benefits of a Fixed Deposit (FD)


What is a Recurring Deposit?

A recurring deposit is a risk-free investment option where investors can deposit a fixed amount every month for a tenure ranging between 6 months to 10 years. The tenure of a recurring deposit varies among respective banks and NBFCs. The RD interest rates remain stable throughout the tenure, and you can withdraw the total principal and accrued interest only at maturity. The features and benefits of an RD are the same as that of an FD. However, the interest rates of a fixed deposit are higher than a recurring deposit.

Shriram Recurring Deposit offers a lucrative interest rate of up to 8.50% per annum for a maximum tenure of 5 years. Like a fixed deposit account, you can make premature withdrawals from your recurring deposit account with a minimal penalty.


FD vs RD – Difference Between Fixed Deposit and Recurring Deposit

Now that you briefly know about a fixed deposit and recurring deposit, you must know the difference between an FD and RD to make a profitable investment decision.

Features Fixed Deposit Recurring Deposit
Tenure
  • Minimum – 7 Days
  • Maximum – 10 Years
  • Minimum – 6 Months
  • Maximum – 10 Years
Frequency of Deposit One Time Deposit Monthly Deposit
Frequency of Payout Regular Payouts or at Maturity At Maturity
Minimum Investment Amount Rs. 1000 (Varies for every bank and NBFC) Rs. 100 (Varies for every bank and NBFC)
Type of Investors Best for Investors like Salaries Individuals, and Pensioners with Lump Sum Money Best for Investors like Students and Freelancers with a Small Amount of Savings
Lock-in Period Minimum 3 Months (subject to the bank's or NBFC’s discretion)) Minimum 1 month - 3 months (subject to the bank's or NBFC’s discretion)
Safety of Deposit Yes – RBI regulates bank FD and Credit Agencies like CRISIL and ICRA to assure safety. Yes – RBI regulates bank FD and Credit Agencies like CRISIL and ICRA to assure safety.
Deposit Insurance Yes – Covered by deposit insurance and credit guarantee corporation (DICGC) Yes – Covered by deposit insurance and credit guarantee corporation (DICGC)
Loan Yes Varies according to banks and NBFCs

FD vs RD: Which is a Better Option to Invest?

Now, you know that one can earn more in a fixed deposit than in a recurring deposit. However, before making an investment decision between FD and RD, there are various factors you should consider like, your financial goals, investment amount and the tenure of the deposit.

If you have a lump sum of money and have future plans to purchase a house, save for children’s higher education, or plan a secure retirement, an FD is the best choice. You will gain a higher interest rate during the FD tenure and receive a considerable amount (principal + accrued interest) at maturity.

In a fixed deposit, there are commonly two types as follows; cumulative and non-cumulative fixed deposit. A cumulative fixed deposit is the most beneficial as your interest will be calculated using compounding interest calculation.

A recurring deposit is the best choice if you have a small amount of money idle every month and want to start a secure investment plan.


Open an FD with Shriram

Shriram Fixed Deposit is one of the best fixed deposit plans in India. Besides, Shriram offers an attractive interest rate of up to 8.75% per annum, and its FD is rated IND AA+/Stable” by India Ratings & Research and “[ICRA]AA+ (Stable)” by ICRA. Hence when a situation arises for you to choose between RD vs FD, decide fixed deposit and open an FD account with Shriram.


FAQs

  1. 1. Which is better, FD or RD?

Considering the higher returns you get from a fixed deposit, an FD is better than an RD. Besides, leading NBFCs like Shriram offers one of the most attractive FD interest rates, up to 8.75% per annum compared to 8.50% per annum for an FD, through which you can build a profitable investment portfolio.

  1. 2. Are FD and RD the same?

No, a fixed deposit and a recurring deposit are different from each other. Here are a few differences; In an FD, you should make a one-time deposit, whereas, in an RD, you should make monthly deposits. In an FD, you can get a loan against your FD, whereas in an RD, you cannot apply for a loan against RD (however, it is subject to the bank's or NBFC’s discretion)  

  1. 3. Which is better, FD or RD or SIP?

An FD, RD and SIP have their own advantages and disadvantages. However, considering the current economic condition, a fixed deposit is the best choice. You will receive assured returns at a higher interest rate without exposing your FD funds to market risks.


Key Highlights:

  • A Fixed Deposit (FD) and Recurring Deposit (RD) are the safest investment options in India.
  • Investors can deposit a lump sum of money in Shriram Fixed Deposit or a bank fixed deposit to attain growth at zero risk.
  • FD and RD guarantee returns at maturity. However, comparing FD vs RD, one can find that a fixed deposit offers higher interest rates which directly helps in earning higher returns than a recurring deposit.
  • Besides with the interest rate of up to 8.75% offered by Shriram Fixed Deposit, investors can park their idle funds from a savings account by opening an FD account with Shriram and reap excellent benefits in the future.
Top Reasons to Invest in a Fixed Deposit
Top Reasons to Invest in a Fixed Deposit
Fixed Deposit vs Life Insurance: Which is the Better Investment? 
Fixed Deposit vs Life Insurance: Which is the Better Investment?