A fixed deposit (FD) and a recurring deposit (RD) are both term deposit instruments, but they serve different purposes. An FD requires a one-time lump-sum investment, whereas an RD allows periodic contributions. The table compares key aspects of FDs and RDs.
| Aspect | Fixed deposit (FD) | Recurring deposit (RD) |
|---|---|---|
| Investment mode | Lump sum at once | Small fixed amount monthly |
| Tenure | 7 days to 10 years | 6 months to 10 years |
| Returns | Interest rate fixed for entire tenure; typically higher than savings account | Similar or slightly lower than FD of same tenure |
| Liquidity | Premature withdrawal allowed with penalty | Premature closure allowed; partial withdrawals not usually permitted |
| Suitability | Ideal for those with surplus funds for long-term savings | Ideal for building savings through disciplined monthly contributions |
Both instruments are safe and covered by deposit insurance (up to ₹5 lakh), and the interest is taxable. Choose an FD when you have a lump sum to invest, and choose an RD to build a corpus gradually.
