Difference between cumulative and non-cumulative Fixed Deposit

As one of the safest investment options, Fixed Deposit enables investors to earn interest on their savings for a fixed tenure, and at a pre-determined rate of interest. When investing in a Fixed Deposit, you may have come across the terms – Cumulative and Non-Cumulative FD. These are two different types of Fixed Deposit, bifurcated based on how you choose to receive your interest payouts.

For those who choose to invest in a Cumulative Fixed Deposit, the interest on their deposit is compounded each year, and paid at the time of maturity. On the other hand, when you invest in a Non-Cumulative Fixed Deposit, the interest on your deposit is paid out monthly, quarterly, half-yearly, or annually, as per your requirements.

Here’s a table comparing the features of both these Fixed Deposit types, to help you understand these better:


Particulars Cumulative FD Non-Cumulative FD
Interest Payout Frequency At maturity Monthly, quarterly, half-yearly or annual – as per investor’s choice
Accumulation of interest) Done throughout the FD tenure Not accumulated, as it’s paid out at intervals
Periodic income No periodic income generated Periodic income generated throughout the tenure
Total interest earned Interest earned is higher, as interest generated throughout the tenure is added to principal, for further compounding Interest earned is lower, and the payout amount decreases, when payout frequency is high
Suitable for Investors looking to grow their savings, and to create a higher corpus for their investment goals Investors looking to fund regular expenses, without denting the principal

Cumulative FD vs Non-Cumulative FD: Where should you invest?

The choice between Cumulative and Non-Cumulative depends on your investment requirements. For investors who don’t need regular cash flows, but looking to save up for long-term goals like building a nest egg for retirement, or short-term goals like funding a major expense, it is best to choose Cumulative Fixed Deposit. By investing in a Cumulative FD, such investors can raise enough money to fund their goals.

On the other hand, investors with a need for periodic income can choose to invest in a Non-Cumulative FD, where they can receive payouts on a periodic basis. The payouts received on these deposits can be seen as substitutes for regular salaries, which can help retirees fund their monthly expenses easily.