Investing in financial instruments to secure your family and accomplish family money goals is an important financial objective. Different institutions in India offer a range of product solutions to encourage people to save money for their future and retirement needs.

Retirement investment is important considering the uncertain global financial condition and increasing inflation rate. Banks offer fixed deposit(FD) and recurring deposit(RD) options to help enhance your financial stability. Here is a detail explaining the difference between fixed and recurring deposit to help choose the apt option.

Before understanding the difference between RD and FD, let us discuss their meaning.

What is a Fixed Deposit?

A fixed deposit is a financial instrument offered by banks to help you invest a lump sum amount for a tenure that can earn a fixed interest throughout the term. You will earn a fixed amount at regular intervals as the interest rate is fixed. The interest payouts will be provided to you monthly or annually or lumpsum based on your preference. The bank will further provide the principal amount entirely at the maturity date.

What is a Recurring Deposit?

A recurring deposit is a financial product offered by banks to help you save a fund regularly over the chosen policy tenure. The bank will accumulate the interest earned and provide it along with the principal amount at maturity or during regular intervals. The interest rate will remain fixed during the entire term.

Now that we have realised the meaning let us discuss recurring deposit vs fixed deposit.

Difference Between Fixed Deposit and Recurring Deposit

Fixed deposit and recurring deposit varies based on certain factors.

Factor	Fixed Deposit	Recurring Deposit
Frequency of payment	You have to make the payment for the FD as a lump sum.	You can make the payment for the RD at regular intervals of time.
Deposit term	The deposit tenure for the FD ranges between 7 days and 10 years.	The deposit tenure for the RD ranges between 3 or 6 months and 10 years.
Interest	The interest rates differ based on the bank and the type of FD. It is decided during inception and is not subject to change.	The interest rate depends on the bank and the type of RD. It is decided during inception and is not subject to change.
Interest payments	The bank will provide the interest amount at regular intervals, either monthly or quarterly or as lumpsum on maturity.	The bank will pay the interest amount at the end of the policy term or regular intervals, based on your choice.
Who can invest	FD is suitable for you if you have a lump sum amount to invest, such as the retirement corpus earned at the end of your employment phase.	RD is suitable for you if you plan to save a fixed amount regularly for a long period. It is affordable if you have a steady flow of income.
Chances of not sustaining the committed investment	As the payment is made in one-time, the chances of not sustaining the investment are nil.	As the payments are made regularly, it is subject to the investor’s discipline to sustain the investment during a financial crisis in the family, which can affect the returns.

Although FD and RD differ based on certain factors, they also have some common features.

Common Features of FD and RD

FD and RD are popular among people for certain common features. Here is a brief about them.

• FD and RD provide fixed income. It is based on a fixed interest rate.

• As the interest rate is fixed, the returns are guaranteed in both FD and RD.

• FD and RD allow for premature withdrawal and are subject to a penalty.

• You can usually avail of a loan facility based on your FD or RD.
  
  
  

RD vs FD, Which Is Suitable For You?

Both FD and RD are good secure investment options. The choice of purchasing between the two will depend on your financial needs.

If you have a retirement corpus or a lump sum amount and expect a regular income for a definite period, you can choose to invest in the FD. On the other hand, if you have a steady flow of income and want to save a fund for a future money goal, such as for your retirement needs, you can invest in the RD. You can opt to receive the lump sum principal and interest earned to purchase an annuity plan that can provide a regular income. For example, when you purchase a retirement plan for our Tata AIA life insurance company, you can choose to benefit from several flexible features.

Retirement plans provide the option between the immediate and the deferred annuity options. The immediate annuity plans start providing regular income immediately on your purchase of the retirement plan. On the other hand, the deferred annuity plans start providing regular income from a later date. There are also other retirement plans, such as the life insurance saving plan that combines the benefit of a life cover and provide guaranteed¹ return payouts as a regular income from when the plan matures.

Conclusion

Fixed deposit and recurring deposit are two different financial products offered by banks to encourage people to save money and benefit from a fixed income. In a fixed deposit, you have to invest a lump sum amount that will earn interest based on a fixed interest rate.

On the other hand, in a recurring deposit, you will have to pay an amount regularly over a certain period. As a result, it will also accumulate an interest amount based on the fixed interest rate. The choice of purchasing between the two will depend on your financial needs and affordability.

L&C/Advt/2022/Jul/1646