Differences Between Fixed Deposit and Recurring Deposit

Banks offer recurring deposits (RDs) and fixed deposits (FDs) as ways to encourage saving. In an FD, the deposited amount is locked in for a set period of time, while in an RD, a set amount must be deposited every month for a set period of time. Both RDs and FDs can be opened online through mobile banking apps or internet banking.

Table of Content
A comparative difference between fixed deposit and recurring deposit
What is a recurring deposit account?
Features of a recurring deposit account
Types of recurring deposit account
How to open a recurring deposit account online
How to open recurring deposit account offline
What is a fixed deposit account?
Features of a fixed deposit account
Types of fixed deposit account
How to open a fixed deposit account online
How to open a fixed deposit account offline

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.

A Comparative Difference Between Recurring Deposit and Fixed Deposit

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

Parameters	Fixed Deposit	Recurring Deposit
When to deposit amount	Lump sum in one go	Every month
Who can open	Anyone with a bank account	Person with a regular source of income
Amount to be deposited	Varies from one bank to another *With Paytm Payments Bank, FD can be created with as low as ₹100	Particularly Rs 500
Tenure	7 days to 10 years *Paytm Payments Bank allows fixed deposits (FDs) to be redeemed at any time, including on the same day they are created. The interest rate on an FD may vary based on the number of days the FD is held.	6 months to 1o years and beyond
Types	Cumulative Fixed Deposit Non Cumulative Fixed Deposit Bank deposits Company deposits Senior citizen FD NRIs FDs Regular FDs Standard FDs Tax saving FDs	Regular recurring deposit account Recurring deposit account for NRI Recurring deposit account for minors Recurring deposit accounts for senior citizens

What is a Recurring Deposit Account?

A recurring deposit (RD) is a financial product offered by banks in which customers with a steady income can deposit a fixed amount of money into an RD account on a monthly basis. When the customer deposits the money, they become eligible to earn interest on it. RDs are a type of term deposit.

A recurring deposit account requires customers to deposit a fixed amount of money on a monthly basis for a pre-determined period.
These accounts can help promote good saving habits.
Recurring deposit accounts can be opened for short, medium, or long terms, and the interest rate offered by the bank may vary depending on the term chosen.
Banks offer different types of recurring deposits to individuals, children, senior citizens, and non-resident Indians (NRIs), with varying interest rates.
The process of opening a recurring deposit account may differ between banks.
It is possible to close a recurring deposit account, but a penalty may be incurred.

What are the Features of a Recurring Deposit Account?

Following are the features of a recurring deposit account that make it a preferable choice to save for the future-

The minimum monthly amount to open a recurring deposit account may be around Rs. 500, although this amount may vary between banks.
The minimum tenure for opening a recurring deposit account is typically six months, with a maximum tenure of ten years.
Individual account holders may be able to open multiple recurring deposit accounts.
Minors may be able to open recurring deposit accounts with the supervision of their parents or guardians.
Partial withdrawal of funds from a recurring deposit account is generally not allowed.
Some banks may offer an automatic deduction feature that allows a set amount to be deducted from the account holder’s account every month, rather than requiring manual deposits.
Senior citizens may be eligible for a higher interest rate on their recurring deposit accounts.
Withdrawing funds from a recurring deposit account before the end of the term may incur a penalty.
Recurring deposit accounts typically require account holders to deposit a set amount every month rather than a 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:

Types of Recurring Deposit Account	Meaning
Regular recurring deposit account	Users over the age of 18 who have a regular source of income Users can earn competitive interest on the deposited amount Interest rates are determined by the tenure selected and the amount deposited
Recurring deposit account for minors	For minors under the age of 18 years The account can be opened by the minor’s guardian/parents
Recurring deposit account for NRI	For NRIs Banks offer a good interest rate on such types of RDs
Recurring deposit accounts for senior citizens	For senior citizens Banks offer higher interest rates

How to Open a Recurring Deposit Account Online?

The following are the steps that must be taken by the user in order to open a recurring deposit account online:

Log in to the bank’s mobile application.
Find the option to open a recurring deposit account, such as under the “investment” or “savings” section.
Input the desired deposit amount and select the desired tenure and type of recurring deposit account.
Specify the date on which the monthly deposit will be made.
Click the “proceed” or “submit” button to complete the process.

Currently, Paytm Payments Bank Limited (PPBL) does not offer the option to open a recurring deposit account online.

How to Open a Recurring Deposit Account Offline?

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

Visit your local bank.
Speak with a bank official and complete the application form for a recurring deposit account, providing details such as the monthly deposit amount, the type of recurring deposit account you wish to open, the tenure, and any nominees.
Submit the application form and the deposit amount.
The bank official will process your application for a recurring deposit account.

Currently, Paytm Payments Bank Limited (PPBL) does not offer the option to open a recurring deposit account in person at a bank branch.

What is a Fixed Deposit Account?

Fixed deposits, also known as term deposits or time deposits, are financial products offered by banks and non-banking financial institutions (NBFCs) that provide a safe way to save for the future. With an FD, users can deposit a lump sum of money for a set period of time and receive interest payments either monthly, quarterly, or upon the maturity of the deposit. FDs also offer a range of other features and benefits, such as:

Customers can earn interest on their deposits for a fixed period of time.
The interest rate on an FD is locked in and does not change, regardless of market or interest rate fluctuations.
Customers have the option of receiving interest payments either regularly or upon the maturity of the FD.
The deposited amount in an FD cannot be withdrawn before the maturity date. If someone wishes to withdraw the funds early, they may have to pay a penalty.

What are the Key Features of Fixed Deposits?

Listed below are all the features of fixed deposits that you should know before investing in them:

An FD requires a one-time lump sum payment, although additional amounts can be deposited as separate FDs.
FDs offer guaranteed returns.
Depositors can choose to receive interest payments on a monthly, quarterly, annual, or upon maturity basis.
FDs are a low-liquidity investment option.
FDs typically offer higher interest rates compared to other investment options.
The returns on an FD are not affected by market fluctuations.
Customers cannot withdraw funds from an FD before the maturity date, although in certain circumstances an emergency withdrawal or willful withdrawal may be possible with a penalty.
Customers can choose to reinvest their FD after it matures.
There is no maximum limit on the amount that can be deposited in an FD.

What are the Types of Fixed Deposits?

The types of fixed deposits are:

Type of fixed deposits	Explanation
Cumulative Fixed Deposit	Interest is only available at the time of maturity Users are not eligible for interval-based interest Higher interest rate Suitable for people who are not looking for regular interest payment FD tenure ranges from 1 year to 5 year
Non-Cumulative Fixed Deposit	Interest provided at regular intervals FD tenure ranges from 1 to 5 years In case of regular interest payout, one will be eligible for a decreased amount at the time of maturity Suitable for people who need regular income in the form of interest
Bank deposits	Offered by banks to customers with saving accounts The rate of interest is lower than the rates offered by non-banking financial companies
Company deposits	Offered by NBFCs with a higher rate of interest For companies with good creditworthiness
Senior citizen FD	For people above 60 years of age Offers higher rate of interest as compared to other FDs Flexible tenure
NRIs FDs	Applicable for NRIs, OCI, PIO with NRO accounts Higher rate of interest as compared to traditional saving accounts Fixed tenure Payment mode- NEFT/RTGS from NRO bank account
Regular FDs	Regular form of investment User can invest the amount for a particular time period A predetermined rate of interest is offered High interest rate
Tax saving FDs	Offered by a major number of banks Tax exemption up to Rs. 1.5 lakh annually Lock in period of 5 years, before that, the amount cannot be withdrawn One time lump sum amount deposit
Standard FDs	Fixed tenure Predetermined rate of interest Tenure starts from 7 days to 10 years Higher interest rates as compared to saving account

How to Open an FD Account Online?

Following are the steps to open an FD online:

Log in to your bank’s online banking platform
Go to the fixed deposit section of the portal
Fill in the required information and submit the form
If you are opening the FD account with a bank you already have an account with, you may not need to complete the Know Your Customer (KYC) process again as the bank already has your information on file.
If you are opening a new FD with a new bank, make sure you have all of the necessary KYC documents and a passport-sized photograph ready to provide to the bank.

How to Open an FD Account Offline?

To open an FD account offline:

Visit the bank’s branch and obtain an application form for a fixed deposit account
Fill out the form with all of the required information and submit it to the concerned official
Deposit the required amount and collect the deposit receipt
If you are opening a fixed deposit account with a new bank, it is recommended to contact an official who can guide you through the entire process. In addition, bring all of the necessary Know Your Customer (KYC) documents and a passport-sized photograph to complete the account opening process.

Conclusion

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.

FAQs

What is the tenure for a fixed deposit account?

The duration of a fixed deposit can range from as little as 7 days to as long as 10 years, depending on the bank. Some banks may offer a wider range of options, while others may have more limited options. Paytm Payments Bank allows customers to redeem their fixed deposits at any time, even on the same day that the deposit was created.

What are the types of fixed deposit accounts?

There are several different types of fixed deposit accounts that individuals can choose from, depending on their needs and financial goals. These types include cumulative fixed deposits, non-cumulative fixed deposits, bank deposits, company deposits, senior citizen fixed deposits, non-resident Indian fixed deposits, regular fixed deposits, standard fixed deposits, and tax-saving fixed deposits. Each of these options may have different features, benefits, and requirements, so it is important to carefully compare them to find the one that best meets your needs.

Is it possible to open an RD online?

It is possible to open a recurring deposit account online through the mobile banking app or internet banking service offered by many banks. This can be a convenient option for those who prefer to manage their finances digitally or who may not have easy access to a physical bank branch.

Who is eligible to open a fixed deposit account?

Individuals who have an active bank account can typically open a fixed deposit either online or in person at a bank branch.

Can I open RD?

Recurring deposits are typically only available to individuals who have a regular source of income, as the account requires a set amount of money to be deposited on a monthly basis. This can make RDs a good option for those who receive a consistent salary or other forms of regular income and are looking for a way to save and grow their money over time.

How much interest will I get on an FD?

The interest rate offered on fixed deposits and recurring deposits can vary significantly from one bank to another. As a result, it is important to compare the interest rates offered by different banks to find the one that offers the best return on your money.