Lesson 1 of 3 · 7 min
What a locked term is actually buying
A fixed deposit and a recurring deposit are the same bargain in two shapes — and the rate on the poster is the least interesting number on either of them.
A deposit is the plainest bargain in Indian finance. You hand a bank money for an agreed length of time, and the bank sets a rate on the day you open it. That rate then stays put for the whole term, whatever happens to rates afterwards.
A fixed deposit takes one lump sum. A recurring deposit takes the same amount every month, which suits a salary. Both are agreements about time — and time is the thing you are really selling.
| Feature | Fixed deposit | Recurring deposit |
|---|---|---|
| What goes in | One lump sum, once | A set amount every month, for the whole term |
| When the rate is set | On the day you open it, for the full term | On the day you open it, for every future instalment too |
| How long each rupee earns | Every rupee earns from day one | Each instalment earns only from the month it lands |
| Breaking it early | Allowed, at a recalculated rate plus a penalty | Allowed, on broadly similar terms |
| Who it fits | Money you already have and do not need for a while | Money you have not earned yet |
Three numbers behind every bank deposit
- DICGC cover
- ₹5,00,000
- Tax starts being cut above
- ₹50,000 of bank interest a year
- What you actually pay
- Your own slab rate
Per depositor, per bank — principal and interest counted together, added across every branch of that bank. Two different banks each carry their own cover.
₹1,00,000 for a resident senior citizen. The bank cuts 10% where you have given your PAN.
Interest on a deposit is added to your income and taxed at whatever slab you land in. The 10% cut is a prepayment against that, not the end of it.
Quick check
You open a one-year RD for ₹5,000 a month and a one-year FD of ₹60,000, both at the same rate. Which pays more interest in rupees?
Check yourself
1 / 3
Kabir asks
You book a three-year FD today and rates in the market rise next month. What happens to your deposit?
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