A Fixed Deposit (FD) and a Recurring Deposit (RD)are commonly used savings instruments in India. Both allow individuals to earn interest on deposited funds for a defined tenure determined by the financial institution. In an FD, investors deposit a lump sum amount, while in an RD, they deposit a fixed amount regularly, usually every month. These deposits are typically not directly linked to market movements during the tenure.

While comparing FD and RD, investors generally evaluate factors such as deposit frequency, tenure options, and financial goals before choosing between the two instruments.

Since FD and RD are often compared by investors looking to organise their savings, understanding the key differences between them can help individuals decide which option may be more suitable for their financial plans.

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 reliable investment option compared to Mutual Funds (MFs), Systematic Investment Plans (SIPs) and Stocks. An FD assures attractive 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 12 to 60 months. Investors may use an online FD calculator to estimate the maturity value based on deposit amount, tenure, and interest rate.

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

What is a Recurring Deposit?

A recurring deposit allows individuals to deposit a fixed amount regularly, usually every month, for a selected tenure. The tenure of a recurring deposit varies among respective banks and NBFCs. The RD interest rates remain consistent throughout the tenure, and you can withdraw the total principal and accrued interest only at maturity.

Premature withdrawal may be allowed in some cases, subject to the institution’s policies and applicable penalty charges.

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 an informed investment decision.

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 retirement, an FD is the right choice

In a fixed deposit, there are commonly two types: cumulative and non-cumulative fixed deposit. A cumulative fixed deposit is suitable as your interest will be calculated using compounding interest calculation.

A recurring deposit may be suitable for individuals who prefer to save smaller amounts regularly rather than investing a lump sum amount at once.

Open an FD with Shriram

Shriram Fixed Deposit offers an attractive interest rate and its FD is rated "CARE AAA; STABLE" By CARE Ratings Limited, "Crisil AA+/Watch Positive" by CRISIL Ratings Limited, and "[ICRA]AA+; Watch Positive" by ICRA."

FAQs

Which is better, FD or RD?

Both fixed deposits and recurring deposits serve different savings purposes. A fixed deposit may be suitable for individuals who have a lump sum amount to invest, while a recurring deposit allows individuals to invest smaller amounts regularly.

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 or recurring 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).

Which is better, FD, RD or SIP?

FDs, RDs, and SIPs serve different financial objectives. Fixed deposits and recurring deposits are savings instruments with defined interest structures, while SIPs are linked to market-based investments. The suitable option depends on individual financial goals, risk preferences, and investment horizon.