The Difference Between Fixed Deposit (FD) and Recurring Deposit (RD)
June 06, 2026
When it comes to saving and investing, making the right choices can help you achieve your financial goals without hassles. In India, two popular options for secure investments are Fixed Deposits (FDs) and Recurring Deposits (RDs). While FDs offer long-term growth, RDs instill disciplined saving.
In this article, we will compare FDs vs. RDs, highlighting their features, benefits, taxation, and returns so that you can make an informed decision that aligns with your financial goals and objectives.
What is a Fixed Deposit?
A Fixed Deposit is a financial instrument that allows you to deposit a lump sum amount for a fixed tenure at a predetermined interest rate. The principal amount remains locked in for the entire duration, and the interest earned is paid out at maturity or periodically, depending on the terms of the FD.
Key Features of FDs
- Lump Sum Investment: You must invest a one-time amount when opening an FD.
- Fixed Tenure: The duration of an FD can range from a few months to several years, typically between 7 days to 10 years.
- Interest Rates: FDs generally offer higher interest rates than regular savings accounts and varies across tenures.
- Safe and Secure: FDs are considered low-risk investments and are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) for amounts up to ₹5 lakh per bank per depositor
What is a Recurring Deposit?
A Recurring Deposit is a savings scheme that allows you to deposit a fixed amount regularly—usually monthly—for a specified period. It is an excellent option for those who want to save gradually but still earn attractive interest rates.
Key features of RDs
- Regular Investment: You contribute a fixed amount at regular intervals (monthly) instead of a one-time deposit.
- Fixed Tenure: RDs typically have tenures ranging from 6 months to 10 years.
- Interest Rates: Like FDs, RDs also offer competitive interest rates, usually in the same range of 5.50% to 7.55% p.a. Senior citizens are eligible for an additional interest rate up to 0.50%.
- Disciplined Saving: RDs encourage savings discipline, making it easier for individuals to accumulate funds over time.
Difference between Fixed Deposit VS Recurring Deposit
The differences between fixed deposit vs recurring deposit are:
| Feature | Fixed Deposit (FD) | Recurring Deposit (RD) |
| Investment | One-time lump sum amount | Fixed amount invested periodically (usually monthly) |
| Minimum investment | Typically starts from ₹1000 | Typically starts from ₹100 |
| Tenure | 7 days to 10 years | 6 months to 10 years |
| Interest calculation | Principal and accumulated interest via compounding | Principal and accumulated amount |
| Interest Pay-out | Monthly, quarterly, annually or at maturity | Interest paid out at maturity |
| Ideal for | Those with lump sum amounts to invest | Those who want to save small amounts regularly |
| Interest rates | Generally higher than savings accounts | Similar to FD rates |
| Loan facility | Loan against FD often available | Loan facility available |
| Taxation | Interest income is fully taxable | Interest income is fully taxable |
| Compounding | Interest can be compounded quarterly or annually | Interest compounded quarterly in most cases |
When to Choose Fixed Deposit?
Choosing an FD might be the right option for you if:
- You Have a Lump Sum Amount: If you have received a bonus, inheritance, or saved a lump sum, FDs are ideal for parking that money while earning good interest.
- You Prefer Safety: FDs offer a secure investment with guaranteed returns, making them suitable for risk-averse individuals.
- You Don’t Need Immediate Access to Funds: Since FDs lock in your money for a fixed period, they are best for individuals who can do without immediate access to their funds.
- You Want Fixed Returns: If you prefer knowing exactly how much interest you will earn over the investment period, FDs provide that certainty.
When to Choose Recurring Deposit?
Opting for an RD might be more beneficial if:
- You Want to Save Regularly: If you find it challenging to save a lump sum, RDs allow you to set aside smaller amounts regularly, making saving easier.
- You Have Short-term Goals: RDs are suitable for accumulating funds for short-term goals like vacations, weddings, or buying appliances.
- You Prefer a Disciplined Approach: RDs encourage disciplined saving habits as you commit to depositing a specific amount every month.
- You Want to Earn Interest While Saving: While you're saving for a goal, you can still earn interest on your deposits, making your money work for you.
Final Thoughts
Both Fixed Deposits (FD) and Recurring Deposits (RD) are excellent savings instruments, each serving different financial needs. Understanding the difference between FD and RD can help you choose the right option for your goals.
Ultimately, the choice between FD and RD depends on your personal financial situation, risk appetite, and savings goals. Evaluate your options carefully, and make an informed decision that will set you on the path to achieving your financial aspirations.
Looking to grow your savings faster? Ujjivan SFB offers a wide range of fixed deposit products. Select the FD of your choice and take a step forward to your financial goals. Alternatively, you can browse through Ujjivan SFB product suite - our wide range of financial products are designed to make your financial life better.
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