What is the difference between fixed deposit and recurring deposit?

Fixed deposits and recurring deposits are very popular among Indians. They are traditional and risk-free. And thanks to digital banking, they are easy to open and maintain. Read this post to know the difference between them before you choose the right one for yourself.

Indians, in general, have traditionally been risk-averse while managing personal finance. They tend to stir clear of market volatility and favour protecting their investment capital while earning risk-free returns. Therefore, it is but natural that term deposits like FDs and RDs are quite popular among Indians.

While both FDs and RDs are good investment options, you should know the difference between the two to manage your finances more efficiently. Read further to know more about them.

Common Features of FD and RD

FDs and RDs have some common features as listed below

  • The interest rates are fixed at the beginning of the tenure and remain changed till the completion of the tenure.
  • Both FDs and RDs provide guaranteed returns on maturity.
  • Both provide loan facilities as per the respective account balances.
  • NRI account holders can also open FD and RD accounts with their respective banks.

Difference between Fixed Deposit and Recurring Deposit

Sr. No. Features Fixed Deposit Recurring Deposit
1 Frequency of deposit One-time deposit at the beginning. Regular monthly or quarterly deposit of a fixed amount.
2 Tenure Minimum: – 7 days, Maximum: – 10 years Minimum: – 6 months, Maximum: – 10 years
For NRI accounts:

For both fixed and recurring deposits, the minimum tenure can be 12 months.

Maximum tenure is capped to 10 years.

3 Rate of Return The rate of return is relatively higher than recurring deposit The rate of return is relatively lower than the fixed deposits.
4 Interest The interest can be credited monthly, quarterly or on maturity as per the choice of the account holder. The interest on an RD deposit is generally credited on maturity.
4 Reasons to invest Fixed deposits can be a good option if you have a lump sum amount to invest.


If you are not going to need this amount for a specific period, you can park the fund in a fixed deposit account and earn interest on it.

Recurring deposits can be a good option if you do not have a lump sum amount to invest but you want to invest regularly by contributing small amounts.


You can open a recurring deposit and continue depositing a fixed amount every month for a pre-defined period and earn interest on it.

5 Default Clause As the full amount is paid in a lump sum in the beginning, there can be no default by the account holder. Appropriate charges can be levied on the account holder in case of defaulting in paying the recurring amount in time
6 Availability of Auto-Renewal facility Yes No

Which One is Better?

There are no exact winners or losers among fixed and Recurring deposit. Both are term deposits to meet different financial objectives. While fixed deposits are ideal for keeping aside funds for the future, term deposits can be best suited for creating a regular investment habit.

You should weigh your options and act accordingly. Depending upon your financial goals, you can either choose one of them or go for a combination of both of these great deposit options.

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