What is a Monthly Interest Payout FD?

Fixed deposits are the perfect saving tool for risk-averse investors. The money deposited in an FD account earns interest for a specific duration at the rate specified when booking an FD. 

 

You can choose between cumulative and non-cumulative FDs depending on your financial goals and needs. The interest payable on the amount is credited at maturity with the former, while the latter credits interest payouts at periodic intervals. 

 

A monthly payout FD is a non-cumulative account that pays monthly interest on the FD. While the FD monthly payout interest rates are comparatively lower than cumulative deposits, they offer a steady income flow and liquidity advantages. 

 

Furthermore, you can compute your monthly payouts using an FD calculator. With the help of an FD calculator, monthly payouts are determined instantly and in a few easy clicks. Read more about the fixed deposit with a monthly payout option.

Interest Rates Offered by Banks

Comparing rates across issuers can help you maximise your FD earnings with monthly payouts. To help you compare rates, take a look at the table showing the interest rates offered by top banks: 

Bank Name

Regular Citizen FD Interest Rate* (p.a.)

Senior Citizen FD Interest Rate  (p.a.)

Minimum Investment Amount

AU Small Finance Bank

3.75%-8.00%

4.25%-8.50%

₹1,000

YES Bank

3.25%-7.75%

3.75%-8.25%

₹10,000

SBI Bank

3%-6.25%

3.50%-7.25%

₹1,000

Axis Bank

3.50%-7.00%

3.50%-7.75%

₹5,000

ICICI Bank

3.00%-7.00%

3.50%-7.50%

₹10,000

Kotak Mahindra Bank

2.75%-6.20%

3.25%-6.70%

₹5,000

HDFC Bank

3.00%-7.00%

3.50%-7.50%

₹5,000

RBL Bank

3.50%-7.00%

4.00%-7.50%

₹1,000

Bank of Baroda

3.00%-7.05%

3.50%-7.55%

₹1,000

Canara Bank

3.25%-6.50%

3.25%-7.00%

₹1,000

IDBI Bank

3.00%-6.25%

3.50%-7.00%

₹10,000

*Interest rates applicable on domestic term deposits under 2 Crore as of 10.02.23. Rates are subject to change as per the bank’s discretion and policies.

How to Calculate Fixed Deposit Monthly Interest Payout?

Estimating your returns from an FD before investing helps you pick the best plan and optimally organise your finances. To that end, every bank and NBFC provides an FD calculator on its website. 

 

Here’s how you can calculate your monthly returns using this monthly payout FD calculator:

  • Step 1: Visit the official bank or the NBFC portal

  • Step 2: Go to the ‘Fixed Deposit’ page under the ‘Deposits’ tab

  • Step 3: Find the ‘FD Calculator’ option on the page

  • Step 4: Fill in details like the deposit amount, customer type and tenor

  • Step 5: Select the ‘Non-Cumulative’ option under the ‘Deposit Type’ tab

  • Step 6: Choose the FD interest ‘Monthly Payout’ option under the ‘Payout Frequency’ tab

     

After completing the final step, the results are displayed instantly on the FD calculator with the monthly payout option. The results include your FD monthly payout interest earnings and the estimated maturity amount. 

How to Convert from Annual Interest Rate to a Monthly Interest Rate

Converting annual FD interest rates to monthly interest rates is simple. Here’s a step-by-step guide to help you do so:

  • Step 1: Divide the annual FD interest rate by 100 to convert it from a percentage to a decimal value

  • Step 2: Divide this annual interest rate by 12 to arrive at your monthly interest rate

  • Step 3: Multiply this value by 100 to convert it into a percentage

     

Here’s an example for a clearer view:

 

Assume you decide to invest a lump sum of ₹5 Lakhs in a fixed deposit. Since you are a retired individual, you opt for a fixed deposit with a monthly interest payout option to ensure that your monthly expenses remain covered. 

 

Consider you enjoy an interest rate of 7.00% p.a. (0.50% higher than the base rate) as a senior citizen. Now, to estimate your monthly rate of interest, do the following calculation: 

 

7%/100 = 0.07

0.07/12 = 0.0058

0.0058 x 100 = 0.58%

 

Thus, the monthly interest rate is 0.58%, while your monthly interest earnings are 0.0058 x 5,00,000 = ₹2,900. 

 

You can also avoid the manual calculation using an FD interest calculator with a monthly payout option. This way, you can get accurate results instantly, as manual calculations can lead to errors.

Advantages of Monthly Interest Payout FD

Here’s a list of benefits you can get from a monthly payout FD plan:

  • Monthly Income - With a monthly payout FD, you are entitled to monthly interest payouts. You can also use an FD monthly payout calculator to estimate the FD monthly payout amount before booking a fixed deposit.

  • Overdraft Facility - Some banks and NBFCs also offer an overdraft facility against monthly payout FDs to ensure that your liquidity needs are met without dissolving the account.

  • Nomination Facility - You can also enlist a beneficiary for fixed deposit accounts. The nominee you select is entitled to the monthly interest on the deposit in your absence. Thus, monthly payout FD plans are great tools for securing the future of your dependents with a fixed monthly income. 

  • Premature Withdrawal Benefits - You can make easy premature withdrawals from your monthly payout FD plan against a minor penalty. Thus, these plans are handy when you need liquidity to manage financial emergencies. 

  • Steady Cash Flows - Since FDs with monthly payouts are safe from market-linked fluctuations, you need not stress about cash flow disruptions in your monthly income. 

  • Better Interest Payout - While interest rates for such plans tend to be lower than cumulative fixed deposits, they still offer better returns than savings bank accounts. 

What Happens During the Premature Withdrawal of Fixed Deposit?

When initiating a premature withdrawal of your FD, most banks and NBFCs charge a small penalty. Banks usually deduct 1% interest from the predetermined interest rate on your fixed deposit at the time of withdrawal.

Simply put, the rate of interest applicable during the premature withdrawal is equal to 1% less than the FD interest rate at the time of booking. So, whether you opt for a monthly payout FD or interest payout at maturity, this process applies to premature withdrawal.

Steps to Prematurely Withdraw a Fixed Deposit Before Maturity

While your FD’s monthly payout option can help cover your usual costs, it may not be enough to meet significant expenses like hospital bills or home renovation costs. In such cases, you may have to close the account before it reaches maturity. 

 

Thus, it is essential to be acquainted with the process of FD closing, even when you are investing in an FD with a monthly payout. 

 

Most banks and NBFCs offer plans with such liquidity benefits where you can withdraw or close the account before maturity. However, doing so attracts a specific penalty charge that varies from one lender to the other. 

 

You can request FD closure through online or offline modes.

 

Follow these steps to close your monthly payout FD plan offline: 

  • Step 1: Visit the bank branch

  • Step 2: Fill up the FD closing form and submit your FD receipt

  • Step 3: Wait for the bank to process the request and make statutory deductions as per its premature account closure norms

  • Step 4: Get the funds credited to your savings account after the FD closure process

     

Follow these steps to close your FD online: 

  • Step 1: Visit the bank website

  • Step 2: Log in to your Internet banking account using your credentials

  • Step 3: Go to the ‘Fixed Deposit’ tab and click on the ‘Close Fixed Deposit’ option from the drop-down menu

  • Step 4: Select the FD account you wish to terminate

  • Step 5: Follow any identity verification steps outlined by the bank to authenticate the request

  • Step 6: Confirm the request by verifying the message or Email sent by the bank to your registered Email ID

     

Once all the steps are completed, the money is transferred to your savings account after penalty deductions.

Disclaimer

The information provided by BFDL is related to the rates provided by Banks and Deposit taking NBFCs as available from public domain and under no circumstances is intended to be source of advice or recommendation of any financial investment advice or endorsement of any sort. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers and use of such information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. Display of any intellectual property along with the related product information does not imply BFDL’s partnership with the owner of the intellectual property of such products and is solely for the purpose of information, unless otherwise provided by BFDL.

FAQs

How can I avail interest payouts?

To avail regular interest payouts on your fixed deposit account, pick a non-cumulative FD plan. With such deposits, you can select favourable payout frequencies ranging from monthly, quarterly, and half-yearly to yearly options.

What payout options are available for an FD?

You can either wait for the FD tenor to end to receive your interest earnings or opt for periodic payouts. With cumulative FDs, interest is only payable with the maturity amount when the plan’s tenor ends. 

 

However, you can opt for annual, bi-annual, quarterly or even monthly interest payout options with a non-cumulative fixed deposit.

Can I obtain monthly interest on a fixed deposit?

Yes. You can opt for an FD with a monthly payout option to receive regular interest earnings every month.

Which bank offers FD interest monthly?

Most Indian banks offer the FD interest monthly payout option. SBI Bank, Axis Bank, HDFC Bank and RBL Bank are some of the top Indian banks offering such plans.

Is the interest on FD taxable every month?

No. The interest earned from fixed deposits is taxed on an annual basis.

Which is a better option, the monthly or quarterly FD interest payouts?

While monthly and quarterly payout modes have minor differences in interest earnings, you can choose either depending on your financial needs. From a returns POV, the quarterly FD is the better option.

Can I get monthly interest on an FD?

Yes. You can get monthly interest by choosing the non-cumulative FD type with a monthly payout option.

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