How Fixed Deposits Work
A Fixed Deposit is a lump-sum investment with a bank or NBFC for a fixed tenure at a fixed interest rate. Your principal is safe, and the interest rate is locked for the entire tenure.
FDs are among the most popular savings instruments in India because they offer guaranteed returns with zero market risk. Senior citizens typically get 0.25–0.75% higher rates.
How FD Interest is Calculated
Banks compound FD interest quarterly. The maturity amount is calculated as A = P × (1 + r/4)^(4×t), where r is the annual rate and t the tenure in years.
For example, ₹1,00,000 at 7% for 5 years, compounded quarterly, grows to about ₹1,41,475. The same amount at simple interest would give only ₹1,35,000.
Cumulative vs Non-Cumulative FDs
In a cumulative FD, interest is reinvested and paid at maturity — this maximizes your returns. In a non-cumulative FD, interest is paid out monthly, quarterly, or annually, which suits retirees who need regular income.
For the same rate and tenure, a cumulative FD always gives a higher maturity amount because of compounding. Choose based on whether you need income now or growth later.
Plan Your FD with a Calculator
Before locking your money, compare maturity amounts across tenures and rates — a 0.5% rate difference on a large deposit can mean tens of thousands of rupees over 5 years.
Use our FD calculator to see your exact maturity amount for any principal, rate, and tenure, and compare it with a Recurring Deposit if you prefer monthly savings instead.