Fixed Deposit Interest Rates – Know How It Is Calculated


Choosing the right financial instrument for investment becomes critical for achieving your financial goals. Fixed deposits have forever been a preferred investment method and assured capital growth. However, not all fixed deposit schemes provide inflation-beating interest rates. If you want to make informed decisions, you need to know how interest rates are calculated.

Read this article to learn about the most straightforward formula to calculate fixed deposit interest rates and how you can get the best rates at a time when FD rates have tumbled a lot from their lifetime highs.

Calculating Fixed Deposit Interest

The formula for calculating fixed deposit interest is the following:

M = P(1+I/C)^C*T


  • M – Maturity
  • P – Principal
  • I – Interest Rate
  • C – Interest Frequency
  • T – Term

If you are an expert in Mathematics, calculating fixed deposit rates might not seem challenging to you. However, for the vast majority, calculating FD rates manually might be a monumental task. A better method is to use a fixed deposit calculator, which displays everything you want at the touch of your fingertips.

Using a Fixed Deposit Calculator

A fixed deposit calculator needs four inputs from you to display the best rates. You can get information about both cumulative and non-cumulative fixed deposits. As a fact, a cumulative fixed deposit delivers higher returns than a non-cumulative FD.

To know the best fixed deposit rates and returns, you have to enter the following details:

  1. Category (Normal, Senior Citizen, Student, NRI, PIO, etc.)
  2. Fixed Deposit Type (Cumulative or Non-Cumulative)
  3. Investment Amount
  4. Maturity Date or Tenor

Once you enter the details on the fixed deposit calculator, it will show you the amount you will receive. For cumulative FDs, the interest, along with the investment amount, is paid at the time of maturity. For non-cumulative FDs, the interest payment frequency depends on the investor’s preference. The most common payout modes are monthly, quarterly, half-yearly, and annual. Financial institutions like PNB Housing Finance offer auto-renewal and auto-maturity facility.

Making The Most From a Fixed Deposit

The returns from a fixed deposit depend on the following factors:

  • Principal – The principal is the most important element in a fixed deposit. The higher the principal, the better the returns.
  • Tenor – You can invest for any time between one year and ten years. Generally, banks pay lesser rates on long-term fixed deposits. However, housing finance companies like PNB Housing offer the highest interest rates on ten-year FDs.
  • Interest Rate – The interest rates determine the amount you will get from a fixed deposit. The better the rates, the higher the returns. PNB Housing Finance offers the best fixed deposit rates of up to 6.95% per annum.
  • FD Account Type – FD accounts are of two types – cumulative and non-cumulative. Cumulative fixed deposits enable capital growth, whereas non-cumulative FDs provide you with liquidity.


Now that you know the best way to calculate fixed deposit rates and the factors that impact the interest rates, it is time you select the best financial institution with a robust financial profile. Housing finance companies, such as PNB Housing Finance, offer up to 6.95% fixed deposit rates on cumulative FD accounts. You can visit the financial institution’s website and use the free calculator to calculate the yield to maturity and plan your investments accordingly.

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