Beyond Banking: Comparing Fixed and Recurring Deposits in Non-Banking Financial Institutions

Fixed Deposits (FDs) and Recurring Deposits (RDs) stand as time-proven financial tools, offering individuals secure avenues for managing their finances. These investment opportunities are made available by banks, non-banking financial institutions, and various financial intermediaries. You can also calculate fixed deposit interest rate by using a calculator.

While fixed deposits entail a one-time lump sum amount for a predetermined duration, recurring deposits involve regular contributions, typically monthly, over the investment period. These deposit variants present their unique merits and can serve as pivotal instruments in accomplishing diverse financial objectives. 

What is a fixed deposit?

A Fixed Deposit (FD), also referred to as a time deposit or term deposit, represents a financial product provided by banks and other financial institutions. It involves an investment method where an individual or entity places a specific sum of money with the financial institution for a predetermined period, typically from a few months to several years. 

In exchange for depositing these funds, the financial institution pays a consistent FD interest rate, which is generally more lucrative than the interest rates offered by regular savings or checking accounts. The key feature of a fixed deposit is that the interest rate remains steady throughout the agreed-upon term, thus earning it the name “fixed deposit.” 

What is an FD calculator?

You can calculate FD interest rate with the help of the FD calculator, which is a useful instrument for calculating the projected maturity sum of your fixed deposit (FD). An FD represents a savings account with a predetermined interest rate for a specified duration. 

The maturity sum denotes the total money you can anticipate after the FD tenure, encompassing the principal amount and the accrued Interest.

Why opt for fixed deposits?

Fixed deposits represent a widely favored financial instrument for various compelling reasons, making them an appealing choice:

  • Security and Assurance

Fixed deposits rank among the safest investment avenues, often provided by banks and financial institutions backed by government deposit insurance. This protection ensures that your principal amount is safeguarded up to a specified limit, instilling confidence.

  • Reliable Returns

Fixed deposits deliver a precise interest amount that you can anticipate throughout the investment period, as the interest rate is fixed at the time of deposit. This predictability simplifies financial planning and management.

  • Consistency

The fixed deposit interest rate remains unaffected by market fluctuations, rendering them less vulnerable to economic volatility. This stability proves particularly advantageous during uncertain economic times.

  • Liquidity Flexibility

Although fixed deposits are generally locked in for a predetermined duration, many banks provide the option of early withdrawals with a slightly reduced interest rate. This feature offers a degree of liquidity to address unexpected financial needs.

  • Tax Advantages

In some countries, fixed deposit interest income may be subject to Tax Deducted at Source (TDS). However, if your overall income falls below the taxable threshold, these deductions could be eligible for a refund, resulting in potential tax benefits.

What is the difference between Fixed and Recurring Deposits in Non-Banking Financial Institutions?

  • One-Time vs. Periodic Deposits

In the case of an FD, you deposit a lump sum amount at the outset of the investment period, constituting a singular investment. Interest accrues on the entire principal amount. With an RD, you make periodic deposits, typically monthly, throughout the investment’s duration. The Interest is calculated based on the increasing balance, considering each monthly deposit individually.

  • Tenure Choices

FDs typically provide a wide array of tenure options, ranging from a few months to several years. RDs also present diverse tenure alternatives, often within the same time frame as FDs, enabling you to opt for a term that aligns with your financial objectives.

  • Interest Computation

FD interest rate is computed on the entire principal sum at the fixed rate, and the Interest can be disbursed periodically or at maturity. Interest in an RD is calculated on the increasing balance, accounting for each monthly deposit independently. The overall Interest is usually paid after the RD’s tenure.

  • Minimum Deposit Requirement

FDs generally necessitate a higher minimum deposit amount, payable at the inception of the tenure. On the contrary, RDs usually involve a lower minimum deposit amount, with monthly contributions throughout the duration.

  • Maturity Amount

The maturity amount for an FD is predetermined at the time of deposit, as it involves a lump sum investment with Interest calculated on the complete principal amount, and the maturity amount in an RD depends on the cumulative monthly deposits made over the duration and the Interest earned on each instalment.

Which is the best app to invest in FDs?

I opt for the Bajaj Finserv fixed deposit interest rate calculator to calculate FD interest. It delivers swift, precise, and trustworthy results. Their user-friendly interface, along with an easily accessible and understandable app, makes it a seamless tool for calculating fixed deposit interest rates. Simplify your investment journey with their services!


Fixed deposits, characterized by their dependability and predictability, are a well-established investment choice with many advantages. These investments provide a secure harbor for your finances, assuring the safety of your principal amount and a guaranteed interest rate.