FD Monthly Payout: How to Calculate, Interest Rates and More

What is a Monthly FD Payout?

Fixed deposits are the perfect saving tool for the risk-averse investor. The money deposited in an FD account earns interest for a specific duration at the rate specified at the time of opening the account. Depending on your financial goals and needs, you can make a choice between cumulative and non-cumulative FDs.

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 FD account that makes you eligible for monthly interest payouts. While the interest rates applicable on such accounts are lower than cumulative FDs, they do offer a steady income flow and liquidity advantages.   

Advantages of Monthly FD Payout 

Here’s a list of benefits you stand to drive from a monthly payout FD plan:

• Monthly Income - With a monthly payout FD, you will be entitled to monthly interest payouts. You can also use a FD monthly interest calculator to estimate the FD monthly payout amount before opening an account.

• 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 such fixed deposit accounts. The nominee you select will be entitled to the monthly interest on the FD in your absence. Thus, monthly payout FD plans are great tools for securing the future of your dependents with a fixed monthly income. 

• Premature Withdraw Benefits - You can make easy premature withdrawals from your monthly payout FD plan against a small penalty. Thus, these FD plans come in handy when you need liquidity to manage an immediate cash crunch. 

• Steady Cash Flows - Since FDs with monthly payout are safe from market-linked fluctuations, you don’t have to worry about cash flow disruptions in your monthly income. 

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

How to Calculate Fixed Deposit Monthly Interest Payout?

Estimating your returns from an FD before investing helps pick the best plan and optimally organise your finances. To this end, every bank and NBFC provides a 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 NBFC portal.

• Step 2: Under ‘Deposits’, go to the ‘Fixed Deposit’ page and find the ‘FD Calculator’ option on the page. 

• Step 3: Fill in details like the deposit amount, customer type and FD tenor.

• Step 4: Select the ‘Non-Cumulative’ option under the ‘Deposit Type’ tab.

• Step 5: Under the ‘Interest Payout Frequency’ tab, select the ‘Monthly Payout’ option.

Once the last step is completed, the FD calculator will automatically display the aggregate interest earned from the FD as well as the estimated maturity amount. 

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

Converting annual FD interest rates into monthly interest rates is fairly 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 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 to make things clearer:

Say you decide to invest a lump-sum of ₹5 Lakhs into an FD. Since you’re a retired individual you decide to opt for a fixed deposit with monthly interest payout option to ensure that your monthly expenses remain covered. As a senior citizen, you enjoy an interest rate of 7.00% p.a. (0.50% higher than the base rate). Now, to estimate your monthly rate of interest, you do the following calculation: 

7%/100 = 0.07

0.07/12 = 0.0058

0.0058 x 100 = 0.58%

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

Steps to Prematurely Withdraw a Fixed Deposit Before Maturity 

While your FD’s monthly payout can help cover your usual costs, it might not be enough to meet significant expenses like hospital bills or home renovation costs. In such cases, you might have to close the FD before it reaches maturity. Thus, it is important to be acquainted with the process of FD closing, even when you’re investing in an FD with monthly payout. 

Most banks and NBFCs offer FD plans with such liquidity benefits where you can make withdrawals or close the account before maturity. However, doing so attracts a certain penalty charge that varies from one lender to the next. Requests for FD closing can be made both online and offline. 

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: After processing, wait for the funds to be transferred to your savings account.

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 will be transferred to your savings account after penalty deductions. 

Interest Rates Offered by Indian Banks

Comparing different rates will help you maximise your FD monthly payouts earnings. To help you compare rates, we’ve drafted the following table that shows the FD interest rates offered by top banks: 

*Interest rates applicable on domestic term deposits under 2 Crore as on 15.11.2022. Rates are subject to change as per the bank’s discretion and policies.