When comparing a Fixed Deposit (FD) and a Recurring Deposit (RD) for a 5-year investment of ₹5 lakhs, the key difference is how you invest money over time and how interest is calculated.

Let’s break it down simply.

🏦 What are FD and RD?

📌 Fixed Deposit (FD)

Fixed Deposit

  • You invest a lump sum (₹5 lakh at once)
  • Fixed interest rate for the full tenure
  • Interest is compounded (quarterly/monthly depending on bank)

📌 Recurring Deposit (RD)

Recurring Deposit

  • You invest monthly installments
  • Same total amount builds up over time
  • Interest is lower on early contributions (because money is added gradually)

📊 Assumptions for Comparison

To make a fair comparison:

  • 💵 Total investment: ₹5,00,000
  • ⏳ Tenure: 5 years
  • 📈 Interest rate (assumed average): 7% per annum
  • 🏦 Compounding: quarterly (typical bank rate)

🏆 Scenario 1: Fixed Deposit (FD)

  • Full ₹5 lakh invested at start

💰 Maturity Value (approx):

👉 ₹7.05 lakh – ₹7.25 lakh

📈 Interest earned:

👉 Around ₹2.05 – ₹2.25 lakh

✔️ Advantage: Full money earns interest from day 1

🏦 Scenario 2: Recurring Deposit (RD)

  • ₹8,333/month for 60 months (to reach ₹5 lakh total)

💰 Maturity Value (approx):

👉 ₹6.80 lakh – ₹7.00 lakh

📈 Interest earned:

👉 Around ₹1.80 – ₹2.00 lakh

✔️ Disadvantage: Early deposits earn less interest time

📉 FD vs RD Comparison (5 Years)

Feature

FD

RD

Investment type

Lump sum

Monthly savings

Total invested

₹5,00,000

₹5,00,000

Maturity value

Higher

Lower

Interest earned

₹2.05–2.25L

₹1.80–2.00L

Returns

🔥 Higher

📉 Slightly lower

🧠 Key Insight

👉 FD gives higher returns because:

  • Entire ₹5 lakh earns interest from day one
  • Compounding works on full amount

👉 RD is better for discipline, not returns:

  • Helps build savings gradually
  • Good for monthly income earners

🏁 Final Verdict

  • 🥇 Best returns: Fixed Deposit (FD)
  • 🧾 Best for savings habit: Recurring Deposit (RD)

👉 If you already have ₹5 lakh → FD is clearly better
👉 If you earn monthly and want discipline → RD is ideal

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.

For more interesting updates wa click and follow Indiaherald WhatsApp channel

Find out more:

FD

Kokila Chokkanathan

20/04/2026 01:03 PM