In India, the top banking investment options are a savings account, a fixed deposit and a recurring deposit. Many people are usually confused about saving accounts, fixed deposits, and recurring deposits.

First let’s get a brief understanding about these investment options:-

A Savings Account is a basic account which is provided by all the banks in India. A savings account provides the facility to deposit and withdraw the money as per your wish. Savings accounts offer interest on the deposit. They are the safest way to grow money. The duration for which the money should be maintained the account is not fixed. There are no fixed rules about the duration. They have ease of withdrawal. The account holders can deposit and withdraw as per their need and convenience. Savings account can be thought of as a wallet, but with the bank. Here, you can store as much and withdraw as much as you want. One can do this while earning interest on the deposited amount.

To know more on savings account, please also see the following articles:-

6 Features of Savings Bank Account

4 Benefits of Savings Bank Account

Fixed Deposit (FD) is a kind of investment, where the money is deposited for a particular tenure and the bank pays interest on the money deposited. The interest rates on fixed deposits are generally higher as compared to other accounts. Thus, it is often said that fixed deposits are the best way to grow money. The reason behind this is that the interest rates on fixed deposits are independent of the market fluctuations and other risks. Unlike a savings account, the money cannot be withdrawn before the fixed tenure. Withdrawing from a fixed deposit before the fixed tenure attracts a penalty which needs to be paid by the account holder.

To know more on fixed deposits, please also see the following articles:-

Overview of Bank Fixed Deposit

Features of Bank Fixed Deposit

Recurring Deposit (RD) is offered by banks where a fixed particular amount is deposited regularly (on monthly basis). The bank pays interest on the money deposited. It is like fixed deposit except that in recurring deposit the money is deposited on a monthly basis and in FD the deposit is made at the time of account opening. The interest earned on the recurring deposits is taxable.

To know more on recurring deposits, please also see the following articles:-

Overview of Bank Recurring Deposit

Features of Bank Recurring Deposit

Now, let us have a look at a comparison between the various aspects of the above banking investment options. It will provide a better understanding on these:-

Summary:-

• Savings bank account can be open for as long as the account holder wants. In FD and RD the duration is fixed but there is a variety in these durations to choose from.

• Exiting savings account is very easy and doesn’t have much terms and conditions. FD’s and RD’s have some T&C’s for exit.

• Savings bank account is the most liquid investment option. The liquidity in the case of FD and RD is a little low as they have lock-in periods.

• The principal amount in all the options is taxable. Only in the special 5 year FD there is a tax exemption available under section 80C.

• Interest earned from deposits in FD and RD is taxable under the head ‘income from other sources’ as per the applicable income tax rate. In case of savings account, interest earned on money in the account is exempt under section 80TTA up to the amount of Rs. 10,000.

• None of the banking investment options are inflation protected. This means that the returns that these investments will give would be affected by the inflation rate.

Below you can see the average interest rates offered by some of the top banks and small finance banks in India.

Bank	Interest Rates
Savings Account	Fixed Deposit	Recurring Deposit
SBI	3.50%	5.75% – 6.85%	6.7% to 6.85%
ICICI	3.50%	4.00% – 7.00%	6.6% to 7%
Axis Bank	3.50%	3.50% – 7.10%	7% to 7.1%
Kotak Mahindra Bank	4% to 6%	6.25%	6.5% to 7.25%
HDFC Bank	3.50%	3.50% – 7.00%	6% to 7.25%
Yes Bank	5.00%	7.19%	7.10%
Citibank	4.00%	5.00% to 5.25%	6% to 7%
IDBI	4.00%	6%	6% to 6.75%
PNB	3.50%	5.70% – 6.75%	6.25% to 6.75%

Bank	Interest Rates
Savings Account	Fixed Deposit	Recurring Deposit
AU Small Finance Bank	5% to 6.5%	7.25% to 7.40%	6.75% to 7.25%
Equitas Small Finance Bank	6% to 6.5%	6% to 8%	7% to 8%
Suryoday Bank	6.25% to 7%	7.25% to 7.75%	7.5% to 8.5%
Ujjivan Small Finance Bank	5.5% to 7%	6.50% to 7.00%	6% to 8%

Below are the penalties levied by some of the top banks on premature withdrawal of deposits.

Savings bank accounts can be closed at any time whenever required. And thus, don’t have any charges for closure.

RD Premature Withdrawal Penalty
Bank	Deduction in Interest rates
HDFC Bank	1.00%
Kotak Mahindra Bank	0.50%
State Bank of India	0.50%
Axis bank	1.00%
Federal Bank	1.00%
IDBI Bank	No Penalties

Fixed Deposits
Bank	Penalty on withdrawal before maturity
HDFC Bank	1.00%
ICICI Bank	0.5%-1%
State Bank of India	0.5%-1%
Axis bank	1.00%
PNB	1.00%

You can analyze these investment options on the basis of the above features and factors. Hope that these features and factors have helped you understand the banking investment options in a much better way.