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Cumulative FD and Non-Cumulative Deposit

A fixed deposit is considered one of the best investment opportunities because it allows investors to gain interest on their investments over a certain period of time and at a set FD rate of interest. A fixed deposit comes in two forms, cumulative and non-cumulative FD, depending on how you choose to collect the interest payments. You can invest in a cumulative  and a non cumulative FD. However, these two types of FDs are different from each other, cumulative FD meaning the interest is accrued.  Read on to know more about cumulative FD meaning , interest rates and cumulative interest rate reinvestment. 

Features of Cumulative and Non-Cumulative FD

Both cumulative and non cumulative FD have their own features and benefits. Cumulative FD meaning an FD that doesn’t offer regular interest payouts. The major advantage being that cumulative fixed deposit offers you cumulative interest reinvestment. You can understand the difference between cumulative and non cumulative FD through this table. 

Cumulative FD

Non-Cumulative FD

Interest is accrued over a period of time

Interest is paid out as per the investor’s choice

Helps in maximising returns

Offers regular income


Cumulative vs Non-Cumulative Fixed Deposit

To help you understand the difference between cumulative and non cumulative FD better, here's a table that compares their features: 


Cumulative FD

 Non-Cumulative FD

Frequency of Interest Payout 

Once the it matures

As per investors choice - monthly or quarterly or half-yearly or annually 

Accumulation of


Accrued throughout the tenure

Interest is not accumulated and is paid at regular intervals

Periodic Income

Not generated 

Generated throughout the tenure

Total Interest Earned 

For further compounding, the interest earned each year is added to principal, and as a result the total interest earned is higher 

Since the payout frequency is higher, the interest earned is lower, and the payout amount decreases  

Suitable For

Depositors looking to grow their savings, and to create a higher corpus for their investment goals 

Depositors looking to fund regular expenses, without denting the principal


Should You Invest in a Cumulative FD or a Non-Cumulative FD?

Your investment criteria will determine whether you should go for a cumulative or non-cumulative deposit. The major difference between cumulative and non cumulative FD is that a cumulative FD gives you cumulative interest reinvestment .  Cumulative FDs are best for investors who don't need daily cash flows but want to save for long-term goals like creating a retirement nest egg or short-term goals like covering a big cost. Such investors can raise enough money to finance their goals by investing in a cumulative deposit. Additionally, in a cumulative FD, cumulative interest reinvestment gives you higher returns.  

Investors who require regular income, on the other hand, should consider a non-cumulative FD, which allows them to earn payouts on a regular basis. The payouts on these deposits can be seen as a replacement for normal income, making it easier for retirees to meet their monthly expenses. You can take the aid of a non-cumulative FD calculator online at Bajaj MARKETS to know more. This will help you understand both the ROI and cumulative interest reinvestment . 

Cumulative Fixed Deposit  

Cumulative FD meaning an FD where you can make a cumulative interest reinvestment. When it comes to a cumulative deposit, the interest on the lump sum amount deposited is accumulated till the end of the maturity period. Here the cumulative FD meaning the interest earned in one year is reinvested or added to the previous principal. This pumped-up interest increases the principal amount.  

The power of compounding is put to best use in the case of a cumulative FD. Once your FD matures, you receive your initial deposit amount along with the accumulated interest as the final amount. Usually, a cumulative FD for a longer tenure has a higher interest income.

Let us take an example here. If you invest Rs. 1 lakh in a cumulative FD with a bank for a year at a 10% interest rate, you will receive Rs. 1,10,000 at the end of the maturity period. This is the sum of the principal amount and the interest earned in a year. This higher return is partly due to cumulative interest reinvestment. Therefore, a cumulative FD meaning higher returns. 

What if the investment is for 5 years? Here is a table to understand cumulative FD meaning and cumulative interest reinvestment better.




Final amount


Rs. 100000

Rs. 10000

Rs. 110000


Rs. 110000

Rs. 11000

Rs. 121000


Rs. 121000

Rs. 12100

Rs. 133100


Rs. 133100

Rs. 13310

Rs. 146410


Rs. 146410

Rs. 14641

Rs. 161051


The interest earned each year is added to the previous principal amount. You will earn Rs. 61,051 as the total interest on the FD. At the end of 5 years, a huge amount including the principal amount and interest will be credited to the investor’s account. 

Non-Cumulative Fixed Deposit

A non cumulative FD meaning the interest accrued is paid to the depositor at regular intervals. Unlike a cumulative deposit where the interest is compounded per year, in a non-cumulative FD, the interest accumulated on the deposit is paid out monthly, quarterly, half-yearly, or annually, depending on the depositor’s needs. 

For example, the interest rates for payouts that happen monthly, quarterly, half-yearly and yearly can be 5.8%, 5.85%, 5.95% and 6.05% respectively. Also, the interest earned is taxable in the hands of investors at the time of receipt.  

Suppose you deposit Rs. 1,00,000 in a non-cumulative fixed deposit in a bank. The interest payout is your choice. Based on the financial requirements, you can choose the interest payout frequency. Check out the amounts you can earn when you choose different kinds of frequency.


Interest Rates

Interest Pay-Out 



Rs. 482



Rs. 1,455

Half Yearly


Rs. 2,940



Rs. 6,000


A non-cumulative FD is best for those investors who want to receive their interest income on a periodic basis depending on their needs. Since the power of compounding is not properly used here, this type of FD offers lesser interest as compared to a cumulative deposit.

Let us take another example here. If you invest Rs. 1 lakh in a non-cumulative FD with a bank at a 10% interest rate for a year, you will receive Rs. 2,500 each quarter if you have opted for a quarterly payout. Since the interest is not withheld by the bank, you will receive only the principal amount when the term ends.

If the tenure is 5 years, the total interest earned from the FD is Rs. 60,000. The investor will receive Rs. 12,500 each year for a tenure of 5 years. Also, the interest is not compounded because there is a yearly interest payout. The interest amount is taxable as per the investor’s income tax slab rate.

How to Maximise Your Fixed Deposit Returns?

You can maximise your returns by opting for a cumulative FD. In a cumulative FD, your earned interest is reinvested on the original deposit amount on a regular basis. This means that your interest earned in the first cycle is added back to your principal amount.  

In the next cycle, you will earn interest on this increased principal which is now with added interest income. This compounding of interest is done till the FD tenure gets over. In this way, you can maximise your returns from a fixed deposit by opting for a cumulative FD instead of a non-cumulative one.

Why invest in an FD with our partners?

Investing with our partners can help you grow your investments by providing great return on investment.  By investing with our partners, you can get some of the highest rates in India, along with assured returns. Here’s a table to help you choose the right FD option. 

Partner Name



Bajaj Finance Fixed Deposit

6.23% - 7.75%



6.50% - 7.25%

6.50% - 7.25%

Mahindra Finance

5.20% - 7.25%

5.55% - 7.25%


✔️What is the difference between cumulative FD and non-cumulative FD?

Interest is compounded quarterly in a cumulative or reinvestment fixed deposit. In a non-cumulative fixed deposit scheme, on the other hand, interest is paid at predetermined intervals. Non-cumulative fixed deposit plans are also appropriate for retirees who need periodic interest payments.    

✔️What is the cumulative fd meaning?

The interest on a cumulative fixed deposit is accumulated over the lifetime of the deposit and charged at maturity. Deposits that are held for a longer period of time typically gain higher FD prices.

✔️What is the cumulative deposit meaning?

The term "cumulative" refers to an accumulation. Similarly, a cumulative fixed deposit is one in which interest is accrued or earned before the maturity period ends. The interest gained over the course of a year or term is either reinvested or added to the previous principal, raising the principal sum.    

✔️Is cumulative FD better?

Interest earned on a cumulative deposit is greater than interest earned on a non-cumulative half-yearly deposit. The main difference is that in one case, interest is paid at maturity, while in the other, interest is paid at regular intervals.