Fixed Deposit Explained

What determines your maturity amount

The interest rate is not the only number that decides an FD’s maturity amount. The principal, tenure and compounding frequency matter too, along with whether interest stays in the deposit or is paid out.

Read the product terms with the quoted rate. Two deposits showing the same annual rate need not produce the same maturity amount if their compounding or payout treatment differs.

A simple FD maturity comparison

Take a principal of ₹1,00,000, an annual rate of 7% and a tenure of three years. The 7% rate is an illustrative input, not a current bank quote. Using the ArthaSiddhi FD Calculator’s compounding convention, the results are:

Why compounding frequency changes the result

In this comparison, quarterly compounding adds interest to the balance more often. Interest added earlier can itself earn interest during later periods, so the quarterly maturity amount is ₹640 higher.

This interest-on-interest effect is explained further in the compound interest guide. Actual contractual maturity values follow the bank’s product terms and calculation method.

Cumulative FD or periodic payout?

With cumulative treatment, interest remains with the deposit and is added to the balance according to the product’s compounding terms. The maturity amount includes the principal and accumulated interest.

A payout option distributes interest instead. The available payout schedules and calculation terms vary by product, so compare the cash flow as well as the quoted annual rate.

Terms to compare before opening the deposit

• Tenure and contractual maturity date.
• Cumulative or payout treatment, including the available payout schedule.
• Compounding convention and the maturity amount shown in the product terms.
• Premature-withdrawal conditions and any applicable reduction or penalty.

Compare maturity, not rate alone

Try the same principal, rate and tenure with a different compounding frequency. The change in maturity amount shows why the headline rate needs to be read with the deposit terms.

Explore one FD question at a time

For the formula and periodic-rate mechanics, read how FD interest is calculated.

To compare money deposited upfront with the same total deposited monthly, see the controlled FD and RD timing comparison.

If the deposit may be closed before maturity, review what premature withdrawal can change before relying on the original maturity amount.