Recurring Deposits and fixed deposits are preferred by investors who want to earn risk-free returns after investing a fixed amount. However, the key difference between them is that RDs allow you to deposit a relatively smaller amount each month whereas you will need to invest a lump sum amount in fixed deposit schemes.
Let’s see which one is the better investment among RDs and FDs especially in today’s times:
Better for short & long term investment goals
If you wish to start saving regularly without depositing a huge amount then RDs is the better option for you. It will help you to gather a corpus for meeting your short-term investment goals.
As fixed deposits offer a flexible tenor, you can even use it for meeting both short and long-term requirements. For instance, a flexible tenor ranging from 12 to 60 months is offered by Bajaj Finance FD. Therefore, you can choose a lock-in period that suits your investment needs and goals.
Better for earning a substantial interest
Both RDs and FDs compound interest after every quarter. However, FDs earn better interest because the interest is calculated on a bulk amount for the entire tenor whereas only the first deposit gains interest till maturity in the case of RDs.
This means that RDs will not provide substantial returns even though you will find that some RDs offer better interest rates than bank FDs.
Better interest rate
Bank FD rates vary from 2.5% to 5.5% depending upon your choice of financier and tenor. Post office RD is currently offering an interest rate of 5.8% whereas bank RD interest rate varies from 5 to 6.5% as it relies on the tenor and bank in which you wish to open an RD account.
If you are in search of an instrument that offers a higher interest rate along with advanced features, then you can invest in a company FD like Bajaj Finance. It provides an interest rate of up to 6.85% that is one of the highest FD rates in the market today. The high-interest rate along with the FD interest calculation method allows it to provide much better returns than RDs.
You can invest in the Bajaj Finance FD plan by filling an online FD form and you will be eligible to earn an excess FD rate of 0.10% for choosing the online investment method.
If you are a senior citizen then you will get a 0.25% extra interest rate on any of Bajaj Finance fixed deposit plans. SCSS (Senior Citizen Savings Scheme) offered by the Post Office of India also provides a high-interest rate but if you compare the actual returns using the SCSS interest calculator and FD calculator then you will see that the latter provides slightly better returns.
If you don’t want to invest a lump sum amount then you can invest in its SDP (Systematic Deposit Plan) with which you can invest a fixed amount (in multiples of Rs. 5000) every month. The number of deposits can range between 6 and 48 as per your financial goals. A lock-in period of up to 60 months can be selected for each deposit or you can choose one maturity date for all the deposits.
Your deposits will grow at an interest rate that prevails on the deposit date. This deposit plan is similar to RD but it also provides the flexibility offered by fixed deposits.
Also, CRISIL and ICRA which are the leading credit rating organizations in India have rated its FD plans highly as safe and stable investment options.
RDs and FDs are popular as safe investment options in India. Both these instruments offer fixed returns as they require you to lock-in a fixed amount for a predetermined period. However, FDs usually offer much higher returns as the invested amount earns interest for the entire amount whereas only the initial deposit earns interest till maturity when it comes to recurring deposits. To earn better returns you can invest in Bajaj Finance FD that offers a rate of interest of up to 6.85%. It is one of the better investment options as it provides much better returns than most fixed income instruments like RDs, SCSS, etc.