Fixed Deposit vs. Recurring Deposit: Features, differences and how to choose the best one?

Key Takeaways

A fixed deposit (FD) requires a lump sum deposit at one time for a pre-decided tenure and earns fixed interest on the full amount from day one.
A recurring deposit (RD) lets you invest a fixed amount every month for a specified period and earnings build up gradually as each instalment earns interest.
FDs usually offer higher returns because the entire amount starts accruing immediately, while RDs are ideal for regular savers with monthly income.
IDFC FIRST Bank provides both FD and RD options with flexible tenures and competitive interest rates to suit various saving habits and goals.

11 Nov 2025 by IDFC FIRST Bank

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The secret to saving money is setting aside some money and letting compound interest do the magic! While only a handful of people manage to get it right, it is possible to save more by educating oneself about strong financial foundations and planning.

Today, banks and other financial institutions help you build assets through investments in various products. Among them, term deposits such as a Fixed Deposit (FD) and Recurring Deposit (RD), are popular investment options in India. They are risk-free investments and offer decent returns.

But when it comes to choosing between a fixed deposit and a recurring deposit, how would you go about it? Most people get confused, if they are not aware of the differences between FDs and RDs. To understand that, one will need to get acquainted with their features and benefits.

What are the features of a fixed deposit account?

An FD helps you earn a fixed rate of interest on a certain amount for a specific period. The interest rate offered varies depending on the tenure of the fixed deposit, which ranges from a few days to a decade. You receive the lump sum on maturity, and it includes the interest amount, if you have opted to receive it, at the end of the tenure. You can open an FD with IDFC FIRST Bank if you have a savings account with us.

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What are the features of a recurring deposit account?

An RD is one of the most sought-after investment options in India. It is generally preferred by people with a regular monthly income, for they can set aside some amount to save and earn returns. Under an RD, you have to deposit a fixed amount of money monthly for a pre-determined tenure. On maturity, you get the total amount, including the interest.

To compare them, you need to know the difference between an FD and an RD. Here are the most significant ones.

Aspects	Fixed Deposit	Recurring Deposit
Amount of Investment	If you wish to invest a lump sum for a certain period of time, you can do so in an FD for a fixed rate of interest decided by the bank.	If you want to set aside some fixed amount of money and invest it in a bank every month, you can choose a recurring deposit.
Tenure	7 days to 10 years. You can choose the tenure you want.	6 months to 36 months. Again, it is your choice.
Minimum Investment	The minimum amount required is Rs 10,000	The minimum amount for which you can book an RD is Rs 100 per month
Interest pay-out	The interest earned on the FD is paid either monthly or quarterly	The interest earned on the amount invested is paid along with the principal amount on maturity.
Automatic renewal	You can choose to renew the fixed deposit by reinvesting the principal amount with or without interest for another term.	There is no such option. The lump sum with interest is deposited in your savings account.
Chances of default	You cannot default the payment as you have to pay a lump sum at the time of opening the FD account.	You may fail to pay the instalments, for you have to deposit a fixed amount every month. A default in paying will lead to paying a penalty.

FD vs RD: Which is better?

Instead of determining which is better – an FD or an RD, you should focus on choosing the one that fits your needs. While both are good investment options, you can make your choice on the basis of your earning potential.

Consider a situation where you have a lump sum received in the form of retirement benefits. You can invest in an FD to earn a fixed rate of interest, which can be reinvested for the benefit of compounding. This can help you maximise your returns.

A recurring deposit will be suitable if you can set aside a fixed sum of money every month. This will help you plan to meet some expenses such as school fees, home repairs, etc., in the future.

In order to make an informed decision, understanding your requirements and choosing the appropriate investment option - an FD or RD is important. If you want to gain further insights into the process of calculating the potential returns on your investment, you will find the FD calculator very useful to arrive at accurate estimations, browse through our website.

While both FD & RD are good investment options, you can make your choice on the basis of your earning potential.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirst.bank.in for latest updates.