Monthly Interest Fixed Deposits: Benefits, Calculations, and How to Start

Posted on Wednesday, February 5th, 2025 | By IndusInd Bank

Fixed Deposits (FDs) can help you achieve a wide variety of goals, from short-term plans like a vacation to long-term objectives like higher education. If your goal is to earn passive income, then a monthly interest FD is the right option. These deposits provide interest payouts every month so that you have a stable cash flow even as your principal remains secure. 

Let’s explore how these FDs work, their benefits, and how to get started with them.  

How Do Fixed Deposits with Monthly Interest Work?

As you may know, fixed deposits earn interest as per the FD interest rates prevailing at the time of booking. 

With monthly interest FDs, you have the option to receive these interest earnings on a monthly basis, instead of at maturity. 

Here’s how they work:  

1. Setting the Principal Amount and Tenure

You deposit a fixed amount for a specific tenure. It can be for a few months or even several years. The fixed deposit interest rate is set at this point as per the tenure. 

2. Choosing the Interest Payout Frequency

At the time of booking the FD, you must inform the bank that you want a monthly interest payout. The bank will direct the interest monthly to your linked bank account.  

3. Receiving Interest Payouts

Now, you will receive the FD interest earnings on a fixed date every month.

Calculating the Monthly Interest on a Fixed Deposit

Let’s see with the help of an example how a monthly interest on an FD is usually calculated. 

Let’s assume you are investing ₹5 lakhs in an IndusInd Bank FD with a tenure of 1 year. The prevailing FD interest rate for this tenure is 7.99%. 

Using the IndusInd Bank FD Interest Calculator, we can estimate that the total returns for this FD will be ₹5,41,163. So, the total interest earned is ₹41,163. 

To get an idea of the monthly interest payout, we will divide the total interest amount (₹41,163) by the number of months in the tenure (12 months).

41,163 ÷ 12 = 3,430. 

So, your monthly interest payout for this fixed deposit is ₹3,430. 

Please note that your principal amount stays intact even as you receive this interest. Also, this is simply an estimate. Your actual returns will be subject to tax (if applicable) and other charges.

Benefits of Monthly Interest Fixed Deposits

The benefits of a fixed deposit with a monthly interest payout are as follows: 

1. Regular Income

The main benefit here is the monthly payout, which leads to a consistent cash flow. This makes them ideal for retirees or anyone needing regular income.  

2. Safe Investment 

FDs are a low-risk investment option unaffected by market fluctuations which means your principal is secure. 

3. Customisable Tenure  

You can choose any tenure that suits your needs. IndusInd Bank offers tenures ranging from 7 days to 10 years.  

4. Predictable Returns

Since you know what the FD interest rate is, you can predict the monthly returns you will be getting on your deposit. 

5. Easy Access to Interest Earnings

Banks directly credit the monthly payout to your linked account which leads to easy access to funds.  

How to Start a Fixed Deposit That Provides Monthly Interest?

IndusInd Bank makes it simple to open a Fixed Deposit account with a monthly interest payout option. Here’s how to get started:  

a. For Existing Customers

1. Log in to your mobile or Internet banking account.  
2. Navigate to the ‘Deposit’ section and select ‘Open/ Create Fixed Deposit’.  
3. Enter the details, choose the monthly interest payout option, and submit the form. 
4. The amount will be transferred from your savings account to the FD.  

b. For Non-IndusInd Bank Customers

Non-customers can also apply for a Fixed Deposit with IndusInd Bank in a few easy steps:  

1. Enter your PAN and Aadhaar details for verification.  
2. Provide your personal information and select the FD type, amount, and tenure. Ensure to select the monthly interest option. 
3. Complete Video-KYC to verify your identity without needing to visit a branch.  
4. Transfer the deposit amount to activate your FD and start earning interest.  

Also Read: The Great Fixed Deposit Debate- Cumulative vs. Non-Cumulative

Conclusion

Monthly interest fixed deposits offer the perfect combination of security and regular income. It can be an excellent choice for those looking to supplement their monthly budget without taking on the risks of the market. With IndusInd Bank’s competitive fixed deposit interest rates, flexible tenures, and user-friendly application process, opening a monthly interest FD has never been easier.

Start earning steady monthly income with IndusInd Bank’s Fixed Deposit options today!  

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.