June 05, 2025
8 mins read
A fixed deposit (FD) is commonly used in India as a savings instrument. They are designed to hold the original amount of money that has been deposited and earn interest depending on the rate of interest provided by the bank. The interest rate applicable to an FD is generally fixed at the time of booking, subject to the issuer’s terms. In 2025, bank fixed deposit interest rates offered by banks reflect prevailing economic conditions and monetary policy signals from the RBI. These adjustments are based on inflationary trends, liquidity levels, and other macroeconomic parameters tracked by the central banking institution.
A fixed deposit is a financial instrument provided by banks and other financial institutions where a particular amount of money is deposited for a specified duration at a fixed interest rate. After the money is deposited, it is with the organization throughout the duration. The amount is usually given back at the time of maturity, along with the due interest.
Key features of an FD include:
Principal repayment is subject to the terms of the deposit and the financial institution’s conditions.
Two types of interest payout options are usually available:
– Cumulative: Interest is compounded and paid at the end of the tenure.
– Non-Cumulative: Interest is paid at regular intervals, such as monthly, quarterly, or annually.
The duration of a fixed deposit varies from 7 days to 10 years. The time period can be chosen according to the financial needs.
The deposit is held as security for the loaned amount, which is usually a fraction of the deposit value.
The interest applicable to a fixed deposit is determined by the institution based on the prevailing bank fixed deposit interest rates and remains constant for the duration of the deposit.
Interest payments are offered monthly in non-cumulative FDs. Here, the interest earned is paid out monthly instead of being reinvested. The rate for such payments is usually slightly lower than that of cumulative FDs because there is no compounding.
For example, an FD investment of ₹60 lakh with a monthly interest payout. Here’s the breakdown of it:
Investment Amount: ₹60,00,000
Annual bank fixed deposit interest rate: 7.25%
Monthly Interest = (₹60,00,000 × 7.25%) ÷ 12 = ₹36,250
This structure provides periodic interest payouts for those requiring regular income. The calculation of interest on a 60 lakh fixed deposit per month provides a practical representation of monthly income from this investment.
FDs are commonly used savings instruments where the interest rate is influenced by several macroeconomic and institutional factors. These rates are not fixed across all periods or providers and often change based on broader financial conditions.
Here are five key factors affecting fixed deposit interest monthly or yearly:
Central banks, including the RBI, use policy tools like the repo rate to control inflation and liquidity. Adjustments in the repo rate impact borrowing costs for banks, which have a ripple effect on interest rates being offered to depositors.
Inflation impacts the real return on fixed deposits. Financial institutions can inflation trends are considered by banks while reviewing deposit rates. Less inflation could lead to smaller interest rate changes.
Surplus funds with banks contribute to the determination of fixed deposit interest monthly or yearly. If a bank has surplus liquidity, it can reduce its deposit rates. Conversely, low liquidity can lead to a bank increasing rates to encourage more deposits.
The tenure or period for which an FD is taken determines the interest rate. Generally, longer tenors may have varying interest rates than shorter ones, based on interest rate expectations and bank policies.
When loan demand is high, banks need additional funds to extend credit. In order to mobilize extra deposits, they can raise FD interest rates. On the other hand, low demand for loans may lead to a cut in deposit rates.
To calculate the monthly interest on FDs, the following steps can be followed. These steps are based on a simple understanding of interest calculations for fixed deposits, where the interest rate is provided on an annual basis.
Before beginning the calculation, ensure you have the following information:
Principal Amount (P): The amount you have invested in the fixed deposit.
Annual Interest Rate (R): The rate at which the FD earns interest annually.
Time (T): The duration for which the FD is invested, usually in years.
Compounding Frequency: Fixed Deposits can either compound quarterly, annually, or monthly. For monthly interest, it is important to know if monthly compounding is applicable, or if the interest is simply calculated on an annual rate.
To calculate monthly interest, the formula used is:
Monthly interest is generally derived from the annual rate, subject to the bank’s compounding methodology.
Where:
P = Principal amount
R = Annual interest rate (expressed as a percentage)
For instance:
₹60,00,000 × 7.25% = ₹4,35,000 annually
Monthly Interest = ₹4,35,000 ÷ 12 = ₹36,250
Note that the interest accrued on fixed deposits is taxable, Interest income from FDs is taxable as per applicable income tax laws and may be subject to TDS. Taxes can actually lower the interest that you earn. The taxability would depend on the country and can be subject to the relevant tax regulations.
Various banks or financial institutions might provide different ways of calculating interest on fixed deposits. The calculation could be done on the basis of simple interest in some instances, or it could be compounded on a monthly basis in others. Always check the terms of your FD to know how your bank or financial institution calculates interest.
You can also use a monthly interest calculator in India to verify these computations. These tools are designed to give accurate results based on real-time rate inputs.
A fixed deposit calculator can estimate the return from investing in a fixed deposit for a given period of time. Fixed deposits are a widely used investment vehicle that provides a fixed rate of interest along with returns. For those who are interested in viewing how much a fixed deposit can grow, fixed deposit calculators are a commonly used as a planning aid.
The principal purpose of a fixed deposit calculator is to calculate the maturity amount of an investment based on parameters such as amount invested, interest rate, and investment duration. These calculators apply mathematical formulae to estimate the exact figure of total return, consisting of principal and interest, that an investor will receive at the end of the term.
Once these details are input, an FD calculator will give the maturity value. This is the principal interest that is added over the period. The outcome may be utilized to determine if the investment is suitable according to the personal financial objectives of the investor.
Along with the maturity value, calculators also display the interest accrued over various durations, providing investors with an understanding of how their investment has increased.
Both monthly and yearly interest payouts serve different financial goals:
Monthly Interest Payouts: Provide regular income. Suitable for retirees or those dependent on periodic income. As calculated, the 60 lakh fixed deposit interest per month can be ₹36,250 at a 7.25% annual rate.
Yearly (Cumulative) Payouts: Interest is compounded and paid at maturity, resulting in a higher maturity value due to compounding.
The choice depends on cash flow needs and long-term planning. Comparing using a fixed deposit calculator can help decide which one suits the requirement better.
Additional Read: Savings Account And FD Interest Calculation Explained
In 2025, bank fixed deposit interest rates are a barometer of economic conditions and changes in monetary policy. Fixed Deposits are typically employed by investors seeking predictable interest income, giving them some predictability in their financial planning. The returns on such deposits depend on current market trends and central bank policies. For those who want to estimate possible earnings, a tool such as an FD Calculator or a monthly interest calculator India can be used to analyze the results of different deposit sizes over different time periods. These calculators can help assess outcomes under different deposit scenarios. with their liquidity and interest requirements.
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As of May 2025, bank fixed deposit interest rates in India range from 3% to 9%, depending on the bank and tenure. Rates for senior citizens tend to be higher, with major banks like HDFC, ICICI, and SBI offering competitive returns.
For a ₹60 lakh fixed deposit interest per month depends on the rate offered by the bank. At an interest rate of 7.25%, the monthly interest would be around ₹36,250. Rates and returns may vary based on bank policies.
To calculate the interest rate, you may use this formula: (Principal × Annual Rate) ÷ 12. Alternatively, you can also use an FD calculator, which is available on financial institution websites.
Fixed deposit interest in India is paid monthly, quarterly, or yearly, based on the bank and the term of the FD selected. Monthly payments are usually made for interest-paying FDs, while others pay interest annually.
FD rates differ based on the bank, tenure, and depositor profile. However, you can compare interest rates offered by different financial organizations to find the one that suits your needs.
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