Difference Between a Fixed Deposit and a Recurring Deposit?

  • Deposit
  • 6 Days ago

Written by - Shriram

A fixed deposit (FD) and a recurring deposit (RD) are ideal investment instruments for people who want stable returns. The significant difference between these two investment options is that you must invest a lump sum amount to book an FD. For recurring deposits, regular payments have to be made.

The fixed and recurring deposits are very similar but can be differentiated by how money is invested. High-interest rates and a tax-saving facility are some of the best benefits of an FD. A recurring deposit is best for those who prefer to invest small amounts.

A Shriram FD can get high-interest rates and additional benefits for senior citizens. You can earn interest up to 8.40% per annum, which includes an extra 0.50% for senior citizens. In addition, you can also avail of 0.25% interest on all renewals of your fixed deposit that has matured.

Given the similarity of deposits, people tend to get confused over which option they should choose. To know the differences and decide which is better, let's explore the features and differences of a fixed deposit vs a recurring deposit.

What is a Fixed Deposit?

A fixed deposit is an investment tool that lets you grow your finances over time with a predetermined interest rate. You must make a one-time investment at the start of the tenure in a fixed deposit. Typically, the term of an FD ranges between 7 days to 10 years. After the maturity of the deposit, you will receive the interest accumulated on the FD and the principal amount in your linked savings account.

Features and Benefits of a Fixed Deposit

  • Assured Returns:
The best benefit of a fixed deposit is that the returns are assured. The risk factor is zero in such a deposit as market fluctuations do not affect the invested amount.
  • Easy Process:
The process of making a fixed deposit is pretty straightforward. Applying for an FD online makes the process even quicker as most banks or Non-Banking Financial Companies (NBFCs) already have your documents saved. You can also apply for an FD offline by visiting the respective branch.
  • Interest Rate:
The interest rate on a fixed deposit is comparatively higher than on a savings account. Many banks and NBFCs also offer additional interest for senior citizens. You can use the Shriram FD calculator to determine the interest you can get for a deposit amount and tenure of your choice.
  • Tenure:
The tenure of a fixed deposit is predetermined. Online mode allows you to book your fixed deposit from your home comfortably. The minimum term for an FD depends on the bank or NBFC of your choice.
  • Taxes:
You can get a tax exemption of Rs. 1,50,000 in a financial year if you invest in a 5-year tax-saving FD.
  • Multiple accounts:
You can have more than one fixed deposit at any point in time. You can create a new FD account to expand your investment portfolio.

What is a Recurring Deposit?

A recurring deposit is a type of term deposit in which you have the flexibility to invest a fixed amount every month and maximise your savings by earning interest on the amount. The interest rate applicable on an RD's investment amount is the same as FD's. A recurring deposit also has a tenure that usually ranges from 6 months to 10 years. The interest rates remain fixed till the term is completed. You can choose to receive the interest at regular intervals until the maturity day.

Features and Benefits of a Recurring Deposit
  • Minimum Investment:
With an RD, there is no specific amount that you need to invest. This feature makes a recurring deposit the most suitable investment option for all investors. The minimum amount for investment depends on the bank or NBFC of your choice and can go as low as Rs. 10.
  • Tenure:
The minimum tenure for an RD is six months and can go on till ten years. You can get more interest in your RD if you invest for a longer term. Premature withdrawal of funds is not allowed in a recurring deposit.
  • Interest Rates:
A recurring deposit's interest rate is often comparable to an FD's. Both offer an interest rate higher than a typical savings account, which is advantageous for investors.
  • Flexible Frequency:
The investors have the freedom to decide the frequency of the deposits. The money can be deposited monthly, quarterly, half-yearly or yearly.

Key Differences Between a Fixed Deposit and a Recurring Deposit
Features Fixed Deposit Recurring Deposit
Deposit Frequency One time deposit Monthly, quarterly, semi-yearly, and yearly deposits
Tenure Period Seven days to 10 years Six months to 10 years
Minimum Investment Amount Approximately Rs. 1000 Approximately Rs. 10
Tax Benefits Income tax benefits on a five-year fixed deposit Not Applicable
Who is it best for? Investors with lump sum savings Individuals with small amounts of money
Interest Payouts Periodic payouts or at maturity Only on maturity


Although a fixed deposit and a recurring deposit may be similar, they each have features that could benefit you depending on your saving goals. An RD is an easy investment option as you can deposit small amounts over time. An FD has more flexibility in terms of interest payouts, and also, you can save taxes with a five-year deposit.

Invest in a Shriram FD today to save your hard-earned money and earn an interest amount that will help you achieve your financial goals. With a Shriram non-cumulative deposit, you can make a steady income from the interest on your FD.

  1. Which is better, RD or FD?
An FD is a better option for individuals that seek higher interest rates, tax-saving features and options on interest payout. Open a Shriram FD today to get high-interest rates of up to 8.40% per annum, which includes 0.50% for senior citizens.
  1. How can I convert RD to FD?
After the maturity of the recurring deposit, you can use the earned interest and principal amount to start an FD. You can use the Shriram FD calculator to determine the amount of interest you can get for a tenure of your choice.
  1. What are the advantages of a fixed deposit?
A fixed deposit has benefits like high-interest rates, assured returns, flexible tenure, and more. You can get all these benefits with a Shriram FD and earn additional interest of 0.25% on all renewals of the matured fixed deposit.

Key Highlights:
  • A fixed deposit and recurring deposit have similar features but are different as in an FD, you have to invest a single time, and in an RD, you have to deposit a small amount every month.
  • A fixed deposit offers high-interest rates than a savings account and tax-saving benefits.
  • You can enjoy regular interest payouts in a non-cumulative fixed deposit.
  • A recurring deposit is best for individuals who prefer to invest small amounts.