Fixed Deposits (FDs) continue to be one of India’s most trusted investment options, especially for investors who value safety and predictable returns. What truly enhances the power of an FD, however, is compound interest. Instead of earning interest only on the principal amount, compound interest ensures that the interest earned is reinvested, allowing your savings to grow steadily over time.
Most banks and NBFCs calculate FD interest using different compounding frequencies—monthly, quarterly, half-yearly, or annually. The more frequently interest is compounded, the higher the maturity value. This makes compounding an essential concept for anyone planning long-term savings through FDs.
With Bajaj Finance Fixed Deposits, investors benefit from competitive interest rates, flexible tenures, and compounding options that help maximise long-term returns without market risk. Check latest rates.
FD compound interest calculation
Compound interest on an FD is calculated using the standard formula:
A = P (1 + r/n) ^ (n × t)
Where:
- A = Maturity amount
- P = Principal amount
- r = Annual interest rate (in decimal)
- n = Number of times interest is compounded per year
- t = Investment tenure in years
This formula helps investors estimate how much their investment will grow over time. Since different institutions follow different compounding frequencies, the final maturity amount can vary even at the same interest rate.
Key factors affecting FD compound interest:
- Compounding frequency: Quarterly compounding generally delivers higher returns than annual compounding.
- Investment tenure: Longer tenures allow interest to compound over more cycles.
- Interest rate: Higher rates naturally result in better compounded returns.
- Principal amount: A higher initial investment benefits more from compounding.
Understanding these factors helps investors choose an FD that aligns with their financial goals.
