Answer By law4u team
The primary difference between FD (Fixed Deposit) and RD (Recurring Deposit) lies in how you deposit money and the interest payout structure. 1. Fixed Deposit (FD): One-time Lump Sum Deposit: In FD, you deposit a lump sum amount in one go. Deposit Duration: The money is locked for a fixed tenure, typically ranging from 7 days to 10 years, and the interest rate is fixed for the entire term. Interest Rate: Interest is usually higher compared to savings accounts. It’s fixed at the time of the deposit and does not change throughout the tenure. Interest Payment: Interest can be paid monthly, quarterly, annually, or at maturity, depending on the terms chosen. Premature Withdrawal: FD allows premature withdrawal, though it may incur a penalty (lower interest rate) in some cases. Risk: Low risk, as returns are guaranteed. 2. Recurring Deposit (RD): Periodic Deposits: In RD, you make regular monthly deposits over a fixed period. The amount is smaller but consistent, usually starting from ₹500 or ₹1,000 per month. Deposit Duration: Typically, RD tenures are 6 months to 10 years. Interest Rate: Like FD, the interest rate is fixed at the time of opening the RD and does not change during the tenure. Interest Payment: Interest is paid either at the end of the term or periodically, depending on the bank’s policy. Premature Withdrawal: RDs can also be withdrawn prematurely, but there may be penalties, and the interest rate could be lower than what was promised. Risk: Low risk, as it’s essentially a fixed-income product. Key Takeaways: FD requires a one-time lump sum deposit, while RD involves monthly contributions. Both offer fixed interest rates, but FD is more suited for those who have a larger sum to invest upfront, and RD suits those who prefer to save smaller amounts regularly over time. Both are safe investment options, especially for risk-averse investors.