Difference between a Fixed Deposit and Recurring Deposit

Investors who are keen on investing in risk-free instruments usually think of depositing their savings in fixed deposits or recurring deposits. Apart from being safe, both these instruments are known to provide easy investment options and a flexible tenor range. However, when you cannot invest in both these instruments simultaneously, you should analyze your current investment goals and needs and plan your investments accordingly. For providing you a clearer picture, we are penning down their differences in this article. 

Key differences 

The main difference between RD and FD are explained in the below table:

Features RDs FDs 
Investment typeMonthly deposits One-time (bulk) deposit 
Investment amount Varies from Rs. 500 to Rs. 1000 according to the financier you choose Varies from Rs. 10,000 to Rs. 25000 as per the financier you choose 
Tenor range From 6 months to 10 years as per your convenience From few months to 5 or 10 years depending upon the financier 
Interest rate 4.5% to 6% (RD interest rate are higher for longer tenors)5% to 6.25% (varies from bank to bank)
Is a periodic interest payout facility available?NoYes 
Are premature withdrawals allowed?Yes but only partial and after completion of at least 1 year or 12 deposits Yes but after completing the initial lock-in period of 3 months  
Which instrument offers higher returns?The returns are slightly lower than FDs because the deposits that are locked in towards the end of the maturity period manage to collect lesser interest The FD returns are comparatively higher as the deposits are locked in for the entire period due to which compounding generates a higher amount 

From the above table, it is clear that investing in an FD is a better decision if you have a reasonably high corpus whereas RDs are suitable for those who have not amassed a sizable corpus yet. Also, the withdrawal options and interest payout facility make FDs a better choice when the requirement for funds arises suddenly. 

If you want to earn even higher returns, you can invest in a corporate FD. Choosing a high-paying fixed deposit like Bajaj Finance FD will ensure that your deposits grow at interest rates of up to 6.75%. To compare the returns with bank FDs, let look at the below example: 

Suppose that you deposit an amount of Rs. 10,00,000 in a bank FD for 5 years. If the same amount is invested in a cumulative FD from Bajaj Finance for the same tenor, your returns would be much higher as shown in the table below:

Fixed Deposit PlanPrincipal AmountTenor Interest RateInterest ReturnsGrowth in investment (%)
Bank FD Rs. 10,00,0005 years5.5%Rs. 3,14,067Rs. 13,14,06731.40%
Bajaj Finance FD Rs. 10,00,0005 years6.75%Rs. 3,86.243Rs. 13,86.24338.62%

Therefore, it can be said that though FD returns are higher than RD returns, the returns offered by Bajaj Finance FD beats both. The other benefits of investing in this FD scheme are given below:

Loan against deposit 

When you need funds immediately, you can apply for a loan against your deposits instead of withdrawing your FDs prematurely. This feature offered by Bajaj Finance FD makes it one of the better options when it comes to managing emergency needs. 

Paperless investment option 

The option of investing in Bajaj Finance FD without any documents through an online FD form and cKYC facility makes it a lucrative investment option for everyone. Even senior citizens can benefit from this FD scheme as they get a 0.25% higher FD interest rate. Non-seniors can maximize their returns by opting for the paperless i.e. online investment option that guarantees a 0,10% higher interest rate. 

Safe instrument 

Bajaj Finance FD is a safe instrument and you can cross-check this by checking the credit ratings that it has received from credit rating agencies like CRISIL and ICRA. Therefore, when you deposit in this FD scheme, you don’t need to worry about the safety of your deposits. 

Multi-deposit feature 

The multi-deposit feature helps you to even out the impact of fluctuating interest rates on your investment strategies as it helps you to leverage the benefit of flexible tenor and FD type by investing in multiple FDs at once. This means that every deposit of yours may have a unique lock-in period and you can invest in both cumulative and non-cumulative FDs to manage your expenses and reach your financial goals without any hassles.

The changing market conditions have forced investors to think of conventional investment options like RDs and FDs. However, you should be aware of the difference between RD and FD before picking either one of these fixed income instruments. As FDs offer slightly better returns, they can be preferred over RDs especially when you have already collected a sufficient corpus. However, for earning at a much higher rate, you can invest in a company FD like Bajaj Finance FD. This FD scheme ensures that your deposits earn at 6.75% and also provides you flexible tenor and smart investment options like a multi-deposit facility.

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gauravkhanna921

Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.

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