Article
Bank FDs vs corporate deposits: where the risk sits
Corporate and NBFC deposits often pay more than bank FDs. The extra return is payment for risk — here is how to see that risk clearly.
4 min read
Topic3 pieces · 8 terms
Fixed deposits, without the fine print
A fixed deposit trades access for predictability: you lend money for a set term at a stated rate. The details still matter — how interest compounds and is paid out, who issues the deposit, what happens if you need the money early, and how the interest is taxed.
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Article
Cumulative vs non-cumulative FDs: same rate, different outcomes
A cumulative FD reinvests interest; a non-cumulative FD pays it out. The rate can be identical, yet maturity values, cash flows and uses differ.
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FD laddering: regular access to cash without guessing rates
Splitting one large deposit into several with staggered maturities gives you regular access to cash and spreads the risk of renewing at the wrong time.
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Glossary
Key terms
The words you’ll meet most often in this topic, defined in a sentence. Each links to the full definition.
Fixed deposit
A deposit with a bank or finance company that earns a fixed interest rate for a chosen term, with principal and interest due at maturity.
Cumulative FD
A fixed deposit that reinvests interest within the deposit and pays principal plus all accumulated interest together at maturity.
Non-cumulative FD
A fixed deposit that pays interest out at regular intervals — monthly, quarterly, half-yearly or yearly — and returns the principal at maturity.
Deposit insurance
Cover from DICGC, an RBI subsidiary, that protects bank deposits up to ₹5 lakh per depositor per bank if an insured bank fails.
Credit rating
A rating agency’s opinion of how likely a borrower is to pay interest and principal on time, on a scale running from AAA down to D.
Credit risk
The risk that a bond issuer or borrower fails to pay interest or repay principal in full and on time.
Maturity
The date on which a bond, deposit or other fixed-term investment ends and its principal is due to be repaid.
TDS
Tax Deducted at Source
Tax withheld by the payer — an employer, bank or fund house — before paying you, and credited against your final tax for the year.
Tools
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Tools for fixed deposits
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When you’re ready, see what CompoundX offers here — how it works, what it involves and the risks to weigh first.
Fixed deposits are less volatile than market-linked investments, but they are not free of risk. Under current rules, bank deposits are covered by DICGC deposit insurance up to ₹5 lakh per depositor per bank; amounts above that depend on the bank’s health. Corporate and NBFC deposits are not covered by that insurance and carry the issuer’s credit risk, so check their credit rating. All FDs also carry inflation risk and reinvestment risk at maturity.
A cumulative FD reinvests interest and pays principal plus all interest at maturity, so interest compounds and the final amount is higher. A non-cumulative FD pays interest out monthly, quarterly, half-yearly or yearly, which suits anyone who needs regular income, and returns the principal at maturity. The FD Calculator shows both for the same rate and term.
Usually, yes. Most banks allow premature withdrawal but pay a reduced rate — often the rate for the period the deposit actually ran, less a penalty. Some deposits, such as tax-saving FDs, cannot be withdrawn early at all. The exact terms are set by each bank or company and stated when you open the deposit, so check them before you invest.
FD interest is generally added to your income and taxed at your slab rate, year by year as it accrues — even in a cumulative FD that pays out only at maturity. Under current rules, banks deduct TDS once interest at that bank exceeds ₹50,000 in a year, or ₹1,00,000 for senior citizens. If your total income is below the taxable limit, you can usually submit a self-declaration so tax isn’t deducted. Check the latest provisions.
Rates change often and differ by issuer, tenure, amount and depositor category. Rather than show figures that may be out of date, CompoundX displays FD rates only when they come from a configured provider, with the source and date shown. Until then, the FD Calculator lets you enter any rate you are considering and see the maturity amount, interest earned and payout schedule.
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