Fixed deposits: compound interest
An FD compounds at a fixed rate, usually quarterly in Indian banks: A = P × (1 + r/4)^(4t). ₹1 lakh at 7% for 5 years grows to about ₹1.41 lakh. The rate is locked in at the start, which is what makes it predictable. Try different terms in the FD calculator.
SIPs: a series of investments
A SIP invests a fixed amount every month, so each instalment compounds for a different length of time. The standard illustration assumes a constant annual return — for example ₹5,000 a month for 10 years at 12% grows to roughly ₹11.6 lakh on ₹6 lakh invested (see the calculation).
The catch is the word assumes. Equity mutual funds don’t return a steady 12%; returns vary year to year and can be negative over short periods. Use SIP calculators to understand the effect of time and contribution size, not as a forecast.
Recurring deposits sit in between
An RD is the FD version of a SIP: fixed monthly deposits at a guaranteed rate, each compounding quarterly for its remaining term. The RD calculator uses the same method banks do.
Don’t forget tax
FD and RD interest is added to your income and taxed at your slab rate. Equity mutual fund gains are taxed differently (as capital gains). Comparing pre-tax numbers can make the gap look bigger or smaller than it really is.
> This is educational content, not investment advice. Consider your goals, time horizon and risk tolerance, and speak to a SEBI-registered adviser if you need personalised guidance.