What Are Cumulative Fixed Deposits?

What is cumulative FD? Should savers go for it? SBI, ICICI, HDFC, Kotak  Bank cumulative FD details - The Financial Express


Fixed deposits (FDs) have been a popular investment option in India, essentially because they offer assured returns. Although lower interest rates and increased awareness about other financial products have led many investors to choose other options, there are multiple reasons to have FDs in your portfolio—lower risks, guaranteed returns, and flexibility.

FDs can be cumulative or non-cumulative. The interest earned during the tenure is compounded at periodic intervals. You can either withdraw the interest or accumulate it to receive a lump sum on maturity. The latter is known as a cumulative fixed deposit, where the interest gets added to your initial investment so that you earn higher returns.

Difference between non-cumulative and cumulative FDs

If you invest in a non-cumulative FD, the interest is paid at regular intervals, which can be monthly, quarterly, bi-annually, or yearly. On the other hand, the interest on a cumulative FD is added to the principal and gets compounded. The entire amount is paid on maturity, leading to higher capital growth.

Who should opt for a cumulative FD?

When you opt for a cumulative deposit, the effective FD interest rate is higher than a non-cumulative deposit. Therefore, if you are certain that you do not require the funds until the end of the tenure, a cumulative FD is an ideal investment alternative.

How to open a cumulative FD

Most banks and non-banking financial companies (NBFCs) offer FDs with varying maturity tenures. You can visit the closest branch of the institution to open a cumulative FD or follow the steps given below to invest in an FD online:

  • Provide your basic information like name, mobile number, date of birth, e-mail address, the FD amount, and select the cumulative option
  • Choose the preferred payment methodafter confirming the details
  • Complete the payment
  • Upload the required FD documents like know-your-customer (KYC) details, which include address proof and identity proof

Choosing between a cumulative and non-cumulative FD may be tricky. If you need the interest amount to pay bills and loan installments or to meet any other regular expense, you may choose to invest in a non-cumulative FD. However, if you do not require periodic interest payout to meet any expenses, a cumulative FD could prove to be a more suitable option. Mahindra Finance offers multiple products with different tenures and Fixed deposit rates. Visit their website to know more about these products and easily open an FD.

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