Monthly Interest for 1 Lakh Fixed Deposit

A large section of the Indian population favors fixed deposits as an investment instrument to park funds for financial emergencies and future goals.  All financial institutions, especially banks, NBFCs, and post offices, offer a range of fixed deposit products to suit your personal preferences. Your fixed deposits ensure money growth through interest applied to the principal. If you are the one who wants to know the monthly interest that you may get for a fixed deposit of Rs.1 lakh, then we are here providing you an estimation for the same.

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What are the Types of Fixed Deposits?

Fixed deposit is an investment vehicle that parks your investible funds to help it grow through the accrued interest. The interest rate for fixed deposits is higher compared to savings accounts. 

The fixed deposit covers a comprehensive product range, depending on the interest payout pattern. Therefore, it is also known as term deposit: broadly classified as described below:

  • Non-cumulative:   Here, the interest accrued on your fixed or term deposit is paid out in your chosen frequency. Usually, it is either monthly or quarterly in case you choose tenors over 12 months.  Thus, your principal investment remains untouched at maturity.

  • Cumulative: The interest accrued in fixed deposits under this category is not paid and added to the principal. Thus, you benefit from compounding with the cumulative balance paid at maturity. In addition, banks typically apply quarterly compounding that helps your money grow. 

Interest Rates for Rs.1 Lakh Fixed Deposit

Every bank offers attractive interest rates that determine your return on investment. The non-cumulative fixed deposit particularly suits those who depend on interest income, like the retired who park their lifetime savings in fixed deposits. They must calculate the monthly interest on Rs.1 Lakh as a benchmark for planning the investment amount to match their needs. On the other hand, others save for fulfilling their financial goals in the long term through the cumulative fixed deposit. The interest rates are based on tenor, and a typical chart looks like the illustrated grid below.

Maturity Buckets

Less than Rs.2 Cr**

Rs.2 Cr to less than Rs.10 Cr#

7 days to 45 days

2.85%

2.85%

46 days to 90 days 

3.85%

3.20%

91 days to 179 days 

3.85%

3.25%

180 days but under 1 year 

4.35%

3.25%

Above 1 year but under 2 years

5.00%

3.50%

Above 2 years  but under 10 years

5.05%

3.50%

** Effective from 01/08/2021

#  Effective from01/10/2021

Source: https://www.bankofindia.co.in/RupeeTermDeposit

Points to Note:

  • The interest rates in the grid are applied to domestic and NRO INR term deposits.

  • Non-cumulative fixed deposits and those with tenors under 90 days are deprived of the compounding benefit. 

  • Individual investors must look up their banks for their interest rates.

  • NBFCs and post offices offer higher interest rates than banks.

  • Senior Citizens (60 years and above) get a preferential rate of 0.25% to 0.50% over the card rate for tenors greater than 6 months. 

How is Interest Calculated on Rs.1 Lakh Fixed Deposit?

Calculating the interest in fixed deposits has never been easier but in this digital age, and individuals are getting computer savvy, it is becoming simpler. The online FD calculator provided by every financial institution helps calculate the interest for non-cumulative and cumulative fixed deposits. The formula used for the calculation is:

A = P (1+r/n)^(nt), where:

  • A is the maturity  amount

  • P is the principal

  • r is the interest rate

  • n is the compounding frequency

  • t is the year tenor

How to Use Calculator for Monthly Interest on Rs.1 Lakh Fixed Deposit?

Interest payout is determined by the prorated interest offered by your chosen frequency and the financial institution. A calculator is a handy tool for you to try without any restrictions on its usage. The primary inputs in the calculator are the investment amount, tenor, and interest rate. Some bank calculators may vary with this narrative, but the overall approach remains uniform. The outcome portrays the principal, maturity value, and monthly or quarterly interest for the chosen tenor.  

Let us understand what we have so far discussed with illustrations using a suitable calculator. It is ideal for you to use the outcome as a benchmark for your financial planning with investible funds in hand. 

Interest Payable for Rs.1 Lakh Fixed Deposit

Tenor 

Monthly Payout

Quarterly Payout 

Card Rate %

Effective Rate %

Interest Amount 

Card Rate %

Effective Rate %

Interest Amount 

6 months 

4.35

4.33

361.19

4.35

4.35

1087.00

12 months 

5.00

4.97

414.93

5.00

5.00

1250.00

24 months 

5.05

5.02

419.06

5.05

5.05

1262.50

36 months 

5.05

5.02

419.06

5.05

5.05

1262.50

60 months 

5.05

5.02

419.06

5.05

5.05

1262.50

Legend:

Interest rate is in percentage 

Amount in INR

In the above grid, look at the card rate and the effective interest rate for monthly payout. The latter is lower than the former across tenors. The reason is that with the monthly interest payout, you lose marginally. 

Now check the quarterly interest payout’s impact and the resultant variation. The card interest rates and the effective rates across different tenors are uniform as the interest payout is quarterly, matching the institution’s interest application frequency. Therefore, it implies that the monthly payout is lower as the interest application is due when it is paid. 

Next, look at the below grid to find the maturity value in cumulative fixed deposits with the same amount and tenor parameters. Again, the compounding benefit is evident in the maturity value.

Interest and maturity payable for Rs.1 Lac Cumulative Fixed Deposit 

Tenor

Card Rate %

Effective Rate %

Total Interest 

Maturity Value

6 months 

4.35

4.35

2186

102186

12 months 

5.00

5.00

5094

105094

24 months 

5.05

5.05

10557

110557

36 months 

5.05

5.05

16247

116247

60 months 

5.05

5.05

28520

128520

Legend:

Interest rate is in percentage 

Amount in INR

In Conclusion

Fixed deposits continue to be a safe investment option in India with their easy availability in different tenors in all financial institutions. While calculating the monthly interest for Rs.1 Lakh fixed deposit is the benchmark, it is also an input for future financial planning. Therefore, you must weigh your investment options to fulfill your financial goals effectively.

FAQ's

Written By: PolicyBazaar - Updated: 03 December 2021
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