Simple vs Compound Interest
Simple interest: Interest is calculated only on the principal. Formula: A = P × (1 + r × t)
Compound interest: Interest is calculated on principal + accumulated interest. Formula: A = P × (1 + r/n)^(n×t)
Most Indian banks use quarterly compounding (n=4) for FDs.
Example: ₹5,00,000 FD at 7.1% for 2 Years
Using quarterly compounding:
- P = ₹5,00,000
- r = 7.1% = 0.071
- n = 4 (quarterly)
- t = 2 years
A = 5,00,000 × (1 + 0.071/4)^(4×2) = ₹5,75,457
Total interest earned: ₹75,457
Factors That Affect Maturity Amount
- Interest rate — higher rate = more returns
- Tenure — longer tenure = more compounding cycles
- Compounding frequency — quarterly is standard; monthly would give slightly more
- Senior citizen bonus — most banks offer 0.25–0.50% extra for seniors
Use a Calculator Instead
Instead of manual calculation, use RupeeTracker's built-in FD calculator. Enter principal, rate, and tenure — get instant maturity amount with quarterly compounding.
Frequently Asked Questions
Yes, most Indian banks compound FD interest quarterly. Some small finance banks may compound monthly — check with your bank.
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