FD vs RD: How Deposit Timing Changes the Maturity Value
A controlled comparison of one upfront FD deposit and equal total capital deposited monthly through an RD.
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This article is for education and general information. See the Financial Disclaimer before using it for an important decision.
Equal capital does not mean equal time invested
An FD places one amount into the calculation at the start. An RD adds money month by month. Even when total deposits, duration and entered annual rate are the same, each rupee does not remain in the model for the same length of time.
The comparison below demonstrates the behaviour of the two ArthaSiddhi calculators under their supported conventions. It does not establish that either deposit is universally better.
What this comparison holds constant
- Total deposited: ₹1,20,000 in each case.
- Entered annual rate: an illustrative 7%, not a current bank offer.
- Duration: one year.
- FD cash flow: ₹1,20,000 deposited at the start.
- RD cash flow: ₹10,000 deposited at the beginning of each month for 12 months.
- Fees, penalties, missed deposits and taxes: excluded.
The calculators use different supported conventions
The FD row uses quarterly compounding. The RD row uses the RD engine's beginning-of-month contribution convention and a monthly rate derived from the entered annual percentage.
Those conventions reflect the current calculators. The table therefore compares calculator behaviour and cash-flow timing; it is not a claim that every bank uses identical contractual methods.
Worked comparison: ₹1.2 lakh deposited in two patterns
| Deposit pattern | Timing | Total deposited | Interest earned | Maturity amount |
|---|---|---|---|---|
| FD | ₹1,20,000 at the start; quarterly compounding | ₹1,20,000 | ₹8,623 | ₹1,28,623 |
| RD | ₹10,000 at the beginning of each month | ₹1,20,000 | ₹4,649 | ₹1,24,649 |
Why the displayed interest differs
The FD starts with the full ₹1,20,000 in the model. The RD reaches the same total only after 12 monthly deposits, so later deposits receive fewer monthly growth periods.
The numerical difference should not be labelled simply as extra return. It combines different deposit timing with the calculators' respective compounding conventions.
Read the FD calculation mechanics for the quarterly formula, or return to Fixed Deposit Explained for the core deposit overview.
Frequently asked questions
Is an FD always better than an RD when the total deposit is equal?
No. The example isolates two calculator cash-flow patterns. Actual suitability, product terms, available capital and deposit timing are outside the calculation.
Why does the RD have less time to earn interest?
Its capital enters month by month. A deposit made near the end has fewer modelled growth periods than money placed at the start.
Do all banks calculate FD and RD maturity exactly this way?
Not necessarily. Actual maturity follows the institution's product terms, deposit dates, calculation method and rounding.
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