Type of Deposits

There are two major type of term deposits that are normally used by people, in banks.
1. Fixed Deposit (FD)
2. Recurring Deposit (RD)

In FD, we deposit a fixed amount, for a fixed period of time, earning some interest, based on the rate declared by the bank. The amount we put is called the principal. We can either get the interest amount at the end of every month or quarter as declared by the bank or accumulate it till the end and add it with the principal and get. The latter type is called cumulative fixed deposit scheme. Once the period is over, we can take the entire amount or renew it again. i.e. put the earned amount in the same bank for some more time.

In RD, we deposit some amount (which may be fixed or variable) every month and it will keep on adding till the tenure gets over. It will also fetch some interest for the amount deposited. If the amount paid is variable, it is called Variable RD (VRD), which was started very recently by banks.

Some more saving scheme popular in India is NSC (National Saving Certificate). Here we put some amount while we start the scheme and we can close the scheme and get money only at the end of deposit period. But if we need in the middle, we can pledge the certificate and get loan from financial institutions namely banks.