What’s the Difference Between Recurring Deposit and Fixed Deposit?

byPriyanka JuyalLast Updated: April 16, 2024

In an RD, a fixed amount is deposited monthly, whereas in an FD, a lump sum amount is deposited for a specific tenure. RDs allow individuals to save gradually, while FDs offer higher interest rates and a fixed maturity period. Additionally, RDs offer flexibility in deposit amounts and tenures, while FDs have stricter terms. Both RDs and FDs provide secure investment options with guaranteed returns, catering to different saving preferences and financial goals.

Recurring Deposit vs Fixed Deposit

There are several differences between fixed deposits (FDs) and recurring deposits (RDs) in terms of their features, deposit requirements, tenure, interest rates, benefits, and limitations. This article will provide an overview of both FDs and RDs, including their benefits and features, and will compare the key differences between these two types of deposit accounts.

Difference Between Recurring Deposit and Fixed Deposit

The difference between fixed deposit and recurring deposit is given below:

What is Recurring Deposit Account?

A recurring deposit (RD) is a banking service that lets people with a regular income deposit a fixed amount of money into their RD account every month. By doing this, customers can earn interest on their savings. RDs are a type of term deposit provided by banks.

  • Customers deposit a fixed amount of money every month for a specific duration in a recurring deposit account.
  • These accounts promote and support good saving habits.
  • Recurring deposit accounts have different periods, such as short, medium, or long terms, and the interest rate provided by the bank may vary based on the chosen duration.
  • Banks offer various types of recurring deposits designed for individuals, children, senior citizens, and non-resident Indians (NRIs), each with their own interest rates.
  • The process of opening a recurring deposit account may vary among different banks.
  • It is possible to close a recurring deposit account, but there may be a penalty charged for doing so.

What are the Features of a Recurring Deposit Account?

  • Minimum monthly deposit amount, usually around Rs. 500
  • Tenure ranges from 6 months to 10 years
  • Option to open multiple accounts
  • Minors can open accounts with parental supervision
  • No partial withdrawals allowed
  • Automatic deduction feature for monthly deposits
  • Higher interest rates for senior citizens
  • Penalty for early withdrawal
  • Monthly deposits instead of lump sum upfront

What are the Types of Recurring Deposit Accounts?

The following are the various types of recurring deposit accounts in which a user can invest: 

How to Open a Recurring Deposit Account Online?

Step 1: Log in to your bank’s mobile application.
Step 2: Look for the option to open a recurring deposit account, usually found under “investment” or “savings.”
Step 3: Enter the desired deposit amount and choose the tenure and type of recurring deposit account.
Step 4: Select the date for the monthly deposit to be made.
Step 5: Click the “proceed” or “submit” button to finish the process.

Read more: How to Calculate the Interest Rate of Recurring Deposit?

How to Open a Recurring Deposit Account Offline?

The options for opening an offline recurring deposit are as follows:

Step 1: Visit your nearest bank branch.

Step 2: Approach a bank representative and express your interest in opening a recurring deposit account.

Step 3: Request an application form for a recurring deposit account.

Step 4: Fill out the application form, providing details such as the monthly deposit amount, desired type of recurring deposit account, chosen tenure, and nominee information.

Step 5: Double-check the completed form for accuracy and ensure all required fields are filled.

Step 6: Submit the filled-out application form along with the initial deposit amount specified by the bank.

Step 7: The bank representative will process your application and verify the provided information.

Step 8: Once the application is processed successfully, the bank will open your recurring deposit account.

Step 9: You will receive a confirmation or account opening document from the bank.

Step 10: Start making regular monthly deposits as per the terms and conditions of the recurring deposit account.

    Recurring Deposit Calculator

    What is a Fixed Deposit Account?

    Fixed deposits, also known as term deposits or time deposits, are a safe way to save for the future. Here are some key features and benefits:

    • Earn interest on your deposit for a fixed period of time.
    • The interest rate remains the same throughout the deposit term.
    • Choose to receive interest payments regularly or upon maturity.
    • Funds cannot be withdrawn before maturity, with a penalty for early withdrawal.

    What are the Key Features of Fixed Deposits?

    • Requires a one-time lump sum payment, but additional deposits can be made separately.
    • Offers guaranteed returns.
    • Choose to receive interest payments monthly, quarterly, annually, or at maturity.
    • Low liquidity investment.
    • Generally, higher interest rates compared to other options.
    • Returns are not affected by market fluctuations.
    • No early withdrawal, but emergency or willful withdrawal may be possible with a penalty.
    • Option to reinvest after maturity.
    • No maximum limit on deposit amount.

    What are the Types of Fixed Deposits?

    The types of fixed deposits are:

    How to Open an FD Account Online?

    Following are the steps to open an FD online:

    Step 1: Log in to your bank’s online banking platform using your username and password.

    Step 2: Look for the section dedicated to fixed deposits on the website or app.

    Step 3: Fill in the necessary information on the provided form for opening a fixed deposit account.

    Step 4: If you already have an account with the bank, you may not need to go through the Know Your Customer (KYC) process again. The bank already has your information.

    Step 5: However, if you are opening a fixed deposit account with a new bank, make sure you have all the required KYC documents and a passport-sized photograph ready to upload or provide to the bank.

    Step 6: Submit the completed form and any additional documents as requested by the bank.

      How to Open an FD Account Offline?

      Step 1: Visit the nearest bank branch to open an FD account.

      Step 2: Ask for an application form for a fixed deposit account from the bank staff.

      Step 3: Complete the form by providing all the required information and submit it to the concerned bank official.

      Step 4: Deposit the required amount specified by the bank and collect the deposit receipt.

      Step 5: If you are opening a fixed deposit account with a new bank, it is advisable to reach out to a bank official who can assist you throughout the process. Additionally, make sure to bring all the necessary Know Your Customer (KYC) documents and a passport-sized photograph to complete the account opening procedure.

        Investing in Fixed Deposit Scheme? Find Out the Right Ones For You

        There are several key differences between fixed deposits and recurring deposits, including the amount of money that can be deposited, the duration of the deposit, and the frequency of deposits. Fixed deposits allow individuals to lock in a specific amount of money for a predetermined period of time, while recurring deposits allow individuals to make regular deposits over a set period of time. Both types of accounts can be useful for encouraging savings habits, but the best choice will depend on an individual’s financial goals, needs, and the services and interest rates offered by different banks. It is important to carefully compare these factors before deciding which type of account to use.

        Disclaimer: Nothing on this blog constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction or investment strategy is suitable for any specific person. You should not use this blog to make financial decisions. We highly recommend you seek professional advice from someone who is authorised to provide investment advice.


        Which is preferable, RD or FD?

        FDs yield higher interest at maturity compared to RDs. RDs offer lower interest rates and pay the interest along with the principal amount at maturity.

        Is the interest from RDs tax-free?

        No, interest from Recurring Deposits is taxable. Income tax is applicable based on the RD holder's tax slab.

        What are the drawbacks of RDs?

        Disadvantages of RDs include no returns for premature withdrawal within the lock-in period, penalties for early withdrawal, fixed instalment amounts, and comparatively lower interest rates.

        Can I close my RD before it matures?

        Yes, but withdrawing funds or closing an RD before maturity incurs a penalty.

        Are 5-year FDs exempt from taxes?

        Yes, tax-saver FDs with a 5-year lock-in period qualify for a tax deduction of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act.

        Which FD type is tax-exempt?

        Tax-saving FDs, with a fixed 5-year tenure, offer a tax deduction up to Rs. 1.5 lakh under Section 80C, unlike other FDs lacking this tax-saving benefit.

        Can I receive monthly interest on an FD?

        Yes, FDs offer two interest receipt modes: cumulative, where interest compounds quarterly and is paid at maturity, and non-cumulative, which provides monthly, quarterly, or maturity-based interest.

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