Investment of surplus money can be restricted to fixed income instruments when the goal is to avoid risk. That is a common view shared by many financial planners. Fixed income instruments, such as bank fixed deposit or bank FD and recurring deposit or RD, provide a fixed return. On a fixed deposit or recurring deposit of less than Rs 1 crore today, one can earn a return in the range of 5.5-7.75 per cent over a tenure of six months. FD and RD are two common types of fixed income instruments, wherein an investor earns an interest rate depending upon his or her choice of tenure. Fixed income products are different from equity-related instruments, such as mutual funds, which offer market-related returns and come with market risks. (Also read: When to pick mutual fund over bank FD?)
Fixed deposit vs recurring deposit: which one to pick?
While fixed deposit is meant for an investor with a corpus of surplus money, that is extra cash that one has after meeting all liabilities and cash payments due at a particular period, recurring deposit is more suitable for someone not in possession of a sum of idle money but has a regular source of income, say experts. Just like a fixed deposit, a recurring deposit enables a person to enter into an agreement with the bank to deposit a sum on regular intervals. For example, an investor having Rs 1 lakh of surplus cash may go for a fixed deposit for the desired term. On the other hand, someone not in possession of that kind of lump sum at a time may set up a recurring deposit of, let's say, Rs 8,000 per month.
FD vs RD: which offers better return?
"Both FDs and RDs are types of fixed investments which are offered by all major banks and financial institutions... Generally, FDs have slightly higher interest rate over RDs," said Abhimanyu Sofat, head of research, IIFL.
Once you have made up your mind about which way to invest, the next step is to select a bank.
"While investing in FDs and RDs of banks, investors should check the interest rates across different banks and features offered by them," added Mr Sofat.
Here's a comparison of interest rates (returns) offered by different banks on fixed deposits and recurring deposits of up to Rs 1 crore:
State Bank of India (SBI) term deposit interest rates (applicable to FD as well as RD)
| Tenors | Interest rate (in per cent) for public w.e.f. 28.05.2018 | Interest rate for senior citizens w.e.f. 28.05.2018 |
|---|---|---|
| 7 days to 45 days | 5.75 | 6.25 |
| 46 days to 179 days | 6.25 | 6.75 |
| 180 days to 210 days | 6.35 | 6.85 |
| 211 days to less than 1 year | 6.4 | 6.9 |
| 1 year to less than 2 year | 6.65 | 7.15 |
| 2 years to less than 3 years | 6.65 | 7.15 |
| 3 years to less than 5 years | 6.7 | 7.2 |
| 5 years and up to 10 years | 6.75 | 7.25 |
| (Source: sbi.co.in) | ||
ICICI Bank fixed deposit interest rate
| Rate of Interest (% p.a.) w.e.f June 07, 2018 | ||
|---|---|---|
| Tenure | General public | Senior Citizen |
| 7 days to 14 days | 4 | 4.5 |
| 15 days to 29 days | 4.25 | 4.75 |
| 30 days to 45 days | 5.5 | 6 |
| 46 days to 60 days | 5.75 | 6.25 |
| 61 days to 90 days | 6 | 6.5 |
| 91 days to 120 days | 6 | 6.5 |
| 121 days to 184 days | 6 | 6.5 |
| 185 days to 289 days | 6.25 | 6.75 |
| 290 days to less than 1 year | 6.5 | 7 |
| 1 year to 389 days | 6.6 | 7.1 |
| 390 days to 2 years | 6.75 | 7.25 |
| 2 years 1 day upto 5 years | 7 | 7.5 |
| 5 years 1 day upto 10 years | 7 | 7.5 |
| 5 Years Tax saver FD(Max upto Rs. 1.50 lac) | 7 | 7.5 |
| (Source: icicibank.com) | ||
(Also Read: Bank Fixed Deposits Vs Corporate Fixed Deposits: Interest Rates, Taxation, Risks)
ICICI Bank recurring deposit interest rates
| Maturity period | Rate of interest (% p.a.) w.e.f June 7, 2018 | |
|---|---|---|
| General | Senior citizen | |
| 6 months | 6 | 6.5 |
| 9 months | 6.25 | 6.75 |
| 12 months | 6.6 | 7.1 |
| 15 months | 6.75 | 7.25 |
| 18 months | 6.75 | 7.25 |
| 21 months | 6.75 | 7.25 |
| 24 months | 6.75 | 7.25 |
| 27 months | 7 | 7.5 |
| 30 months | 7 | 7.5 |
| 33 months | 7 | 7.5 |
| 36 months | 7 | 7.5 |
| Above 3 years upto 5 years | 7 | 7.5 |
| Above 5 years upto 10 years | 7 | 7.5 |
| (Source: icicibank.com) | ||
(Also Read: Recurring Deposit (RD) Interest Rates Of These Banks Are As High As 9%)
Meanwhile, small finance banks often provide higher returns on fixed income products.
AU Small Finance Bank fixed deposit interest rates
| Tenure | Interest rate p.a. (%) | Interest rate p.a. (%) for senior citizen |
|---|---|---|
| 7 Days to 1 Month 15 Days | 5.50% | 6.00% |
| 1 Month 16 Days to 3 Months | 6.75% | 7.25% |
| 3 Months 1 Day to 6 Months | 6.90% | 7.40% |
| 6 Months 1 Day to 12 Months | 7.00% | 7.50% |
| 12 Months 1 Day to 18 Months | 7.75% | 8.25% |
| 18 Months 1 Day to 24 Months | 7.15% | 7.65% |
| 24 Months 1 Day to 36 Months | 7.25% | 7.75% |
| 36 Months 1 Day to 45 Months | 7.30% | 7.80% |
| 45 Months 1 Day to 60 Months | 8.00% | 8.50% |
| (Source: aubank.in) | ||
AU Small Finance Bank recurring deposit (RD) interest rates
| Tenure | Interest rate p.a. (%) | |
|---|---|---|
| For domestic/NRO deposits | For senior citizens | |
| 3 Months | 6.75% | 7.25% |
| 6 Months | 6.90% | 7.40% |
| 9 Months | 7.00% | 7.50% |
| 12 Months | 7.00% | 7.50% |
| 15 Months | 7.75% | 8.25% |
| 18 Months | 7.75% | 8.25% |
| 21 Months | 7.15% | 7.65% |
| 24 Months | 7.15% | 7.65% |
| 27 Months | 7.25% | 7.75% |
| 30 Months | 7.25% | 7.75% |
| 33 Months | 7.25% | 7.75% |
| 36 Months | 7.25% | 7.75% |
| 37 Months to 45 Months | 7.30% | 7.80% |
| 46 Months to 60 Months | 8.00% | 8.50% |
| 61 Months to 120 months | 7.25% | 7.75% |
Suryoday Bank fixed deposit interest rates
| Period | Interest Rate (Per Annum) | Senior Citizen Rate (Per Annum) |
|---|---|---|
| 7 days to 14 days | 4.00% | 4.00% |
| 15 days to 45 days | 4.00% | 4.00% |
| 46 days to 90 days | 5.00% | 5.00% |
| 91 days to 180 days | 5.50% | 5.75% |
| 181 days to 240 days | 7.50% | 7.75% |
| 241 days to 364 days | 7.75% | 8.00% |
| 12 months to 24 months | 8.50% | 8.75% |
| >24 months to 36 months | 8.75% | 9.00% |
| >36 months to 60 months | 7.75% | 8.00% |
| >60 months to 120 months | 7.25% | 7.50% |
| (Source: suryodaybank.com) | ||
Suryoday Bank recurring deposit interest rates
| Interest Rates | Domestic Deposits (Effective: From September 21, 2017) | |
|---|---|---|
| Period | Interest Rate | Senior Citizen Rate# |
| (Per Annum) | (Per Annum) | |
| 6 months | 7.50% | 7.75% |
| 9 months | 7.75% | 8.00% |
| 12 months | 8.50% | 8.75% |
| 15 months | 8.50% | 8.75% |
| 18 months | 8.50% | 8.75% |
| 21 months | 8.50% | 8.75% |
| 24 months | 8.50% | 8.75% |
| 27 months | 8.75% | 9.00% |
| 30 months | 8.75% | 9.00% |
| 33 months | 8.75% | 9.00% |
| 36 months | 8.75% | 9.00% |
| Above 3 years to 5 years | 7.75% | 8.00% |
| Above 5 years to 10 years | 7.25% | 7.50% |
One can make a decision primarily on the basis of interest rates and tenure while setting up a fixed deposit or recurring deposit at a bank, say experts. “Both FD and RD offer more or less the same features. So, a salaried person can invest in RDs since he/she receives regular income while a person having lump sum amount can invest in FDs,” Mr Sofat of IIFL further said.
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