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What is Cumulative Fixed Deposit

What is cumulative fixed deposit

Cumulative Fixed Deposit is a kind of Fixed Deposit where the interest is payable at the time of maturity with the principal amount. The interest is compounded every quarter or year and then reinvested with the principal amount. The tenor for a Cumulative FD can range between 12 to 60 months. Cumulative FDs are suitable for investors who don’t need a regular interest payout. It helps build a corpus by saving a large amount. So, for instance, Mr Sharma deposits Rs.10 lakh for 5 years in a Cumulative FD with 7.85% interest rate. Since, it is a Cumulative scheme; he will not receive the interest amount every month or every year. Instead, he will receive Rs. 14,59,153 as the total of principal amount and accumulated interest at the time of maturity.

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