Calculator Comparison
FD vs RD
A detailed side-by-side comparison of Fixed Deposit and Recurring Deposit covering returns, risk, tax treatment, liquidity, and who each instrument is best for.
4
FD wins
3
Ties
0
RD wins
Feature
Fixed Deposit
Recurring Deposit
Investment Type
Interest Rate
Flexibility
Premature Withdrawal
Tax Treatment
Compounding
Best For
Detailed Analysis
Fixed Deposits and Recurring Deposits are both bank-guaranteed instruments, but they serve different cash flow patterns. FDs are for deploying an existing lump sum, while RDs are for building a corpus from regular monthly savings. If you already have the money, an FD is always the better choice; if you are accumulating gradually, an RD serves the purpose.
Interest Rate Dynamics
FDs typically offer marginally higher interest rates than RDs at the same bank for the same tenure. This is because the bank receives the full principal upfront with an FD and can deploy it immediately, whereas RD funds come in gradually. The rate difference is usually 0.10-0.25%, which translates to a small but noticeable difference over longer tenures. Additionally, FD interest compounds on the full principal from day one, while RD interest accumulates only on the running balance.
When to Choose Each
Choose an FD when you have a lump sum (from a bonus, inheritance, maturing investment, or savings) that you want to park safely for a defined period. Choose an RD when you want to build a savings discipline of setting aside a fixed amount monthly, similar to a SIP but with guaranteed returns. For salaried individuals with surplus income each month, an RD can serve as the savings vehicle for near-term goals like a vacation or down payment.
Frequently Asked Questions
Does FD give more interest than RD?
Yes, marginally. FDs typically offer 0.10-0.25% higher interest than RDs at the same bank. More importantly, the FD earns interest on the full principal from day one, while the RD accumulates interest only on the growing balance. Over a 5-year period, a 10 lakh FD will earn approximately 5-8% more total interest than 12 monthly RD instalments totalling the same amount, simply because of the time value advantage.
Is RD better than FD for monthly savings?
If you are saving from monthly income and do not have a lump sum to invest, RD is the appropriate choice. You cannot start an FD without having the full amount upfront. RD allows you to build savings systematically with a guaranteed return. However, if your goal is more than 3 years away, consider a SIP in a debt mutual fund instead, which offers better tax efficiency and potentially higher returns.
Can I break an RD like I break an FD?
Yes, but the process differs. Breaking an FD means closing the entire deposit with a penalty (0.5-1% rate reduction). Breaking an RD typically means stopping future contributions and withdrawing the accumulated balance, which is treated as a premature FD at a penalty rate. Some banks allow partial premature closure of RDs where they close a portion of the accumulated deposits while the rest continues.