Find your suitable insurance plan
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Looking at the unpredictability of the present times, it is important to invest in different funds to secure your future well. Irrespective of the fact how much you are earning currently, getting investments done for the future is a must for everyone.
Fixed Deposits (FDs) and Recurring Deposits (RDs) are two such important and low risk investments which suit investors looking for safe investment options. However, the two plans have certain differences too, which we are discussing in this post.
Recurring Deposit (RD) is an investment plan offered by almost all banks, post-offices and other financial institutions in India. An investor can contribute a particular sum of money to their RD account to receive guaranteed returns after a fixed tenure, which is decided by the investor at the time of buying the plan. It can range in between 6 months to 10 years. Also, the interest rate offered under RD varies as per the bank that you are getting your RD account opened.
Read More: How to Pay Post Office Recurring Deposit (RD) Amount Online?
A Fixed Deposit (FD) is a type of investment that allows the investor to invest money for a fixed period of time and to earn high returns in exchange. You can open a FD account at a post office, bank, or in a NBFC as per your choice. However, you must check the interest rate offered by a particular financial institution as it may vary depending on the financier. The returns on the account, however, are as per the tenure of the FD and the amount deposited by the investor.
Below are some features of FD;
Know More: Which Bank has the Highest Interest Rate for FDs?
Let us now take a look at the key differences between Fixed Deposit and Recurring deposit in the table below.
| Feature | Recurring Deposit | Fixed Deposit |
| Frequency of Investment | It can be any amount of money that can be invested by the investor regularly at intervals | In this case, the investor is required to invest an amount as a one-time investment and cannot make any further contributions later on during the term of the investment |
| Duration of deposit | Recurring deposit allow the investor to choose a duration of 6 months to over 10 years | In case of fixed deposit, the duration of tenure can range from 7 to 10 years |
| Interest Earned | The interest earned in recurring deposit is similar or low than that of FD interest | The interest earned under fixed deposit is higher than recurring deposit |
| Withdrawal of Maturity | The RD maturity deposit can be withdrawn on a quarterly or regular interval | In a fixed deposit, the maturity amount is only provided after the end of the FD tenure |
| Benefit Offered | With RD, one can inculcates the habit of savings by investing money in the RD deposit regularly/monthly | Fixed deposit, on the other hand, is a lump sum amount that is deposited and on which the investor can earn interest |
| Clause of Payment | In RD, if you do not make a payment for 6 months or more, there are chances of the RD account getting closed | On the other hand, in case of FDs where the total payment is made in one go, there is no clause of payment attached with the FD |
Now that you know the meaning and the difference between fixed deposit and recurring deposit in India, the question that comes to your mind is which investment plan to choose – RD or FD.
It actually depends on the investor to choose between the two plans. Both these plans are low-risk options and depending on your finances or the ability to pay (lump-sum amount or small regular amount), you can make the choice.
Once you decide to make an investment of RD or FD, you can visit your nearest post office or bank to get the process done and start the investment. This way, you can create a corpus for your future and stay prepared from the sudden emergencies. Alternatively, you can use the fixed deposit and recurring deposit calculator to calculate the amount online.
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In the Fixed Deposit (FD) account, the investor can deposit an amount for a fixed duration to earn interest on that amount. On the other hand, in Recurring Deposit the customer can deposit amounts at intervals for an extended period. It is generally used to develop the regular habit of saving.
In terms of returns, FD is likely to give higher returns because the amount in FD is lump sum and it is deposited at one go. On the other hand, in RD, the account holder pays monthly deposits which earn returns accordingly.
A Recurring Deposit is like a Fixed Deposit where once you deposit the money, it cannot be withdrawn until maturity. Generally, RDs do not allow partial withdrawals from the account.
Yes, you do get interest paid on RDs as well. In fact, the interest rate of Recurring Deposit is similar or slightly lower than the interest offered under FD. Also, the rate of interest in RD is locked-in and so the investor doesn’t have to worry about any interest fluctuations.
The RD account comes with a minimum lock-in period of one month. If the investor closes it prematurely within a month, he/she will not be paid any interest. Rather, he will just get the principal amount.
PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
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