A Fixed Deposit is still one of the most renowned instruments of investment in India. Everyone aims for guaranteed returns on their capital, a service that lies at the very crux of a fixed deposit scheme. Multiplying one’s monetary resources is indeed vital to afford a comfortable lifestyle, and fixed deposits offer a secure way to do that long-term.

By locking your funds at a profitable interest rate of pnb fixed deposit, you can establish a solid net of savings for your future. Apart from considering the aspect of assured returns, it is equally important to know the types of fixed deposits and understand the key differences between them. The main idea that separates the two types of FD Schemes is the formula used for calculation of the interest and maturity amount.

Since various banks and NBFCs (Non-Banking Finance Companies) offer different rates of interest, you should conduct a basic research and check FD schemes. You can also avail the online FD calculator facilities to compute your exact gains. Also, you can make slight adjustments to the principal amount, tenure, or interest rate figures to modify your initial FD plan into a new one that best suits your needs.

Mentioned below are the two most popular categories of Fixed Deposit Schemes.

**1) Cumulative Fixed Deposit**

In case of a cumulative fixed deposit, interest is calculated upon the principal amount as well as the reinvested interest. Opting for this type of deposit scheme usually brings in higher returns since the interest keeps increasing with the added investment. However, you can withdraw your principal amount along with the interest only upon maturity. To choose the best interest rate of PNB fixed deposit, you can visit the PNB website to compare the values displayed on a chart.

**The formula used to calculate compound interest on an FD is as follows-**

**A = P (1 + r/n) ^ n*t**

Where “A” is the maturity amount, “P” is the principal amount, “r” is the rate of interest and “n” is the compounded interest frequency, and “t” is the number of years.

For example, if you wish to invest 3 lakhs in a fixed deposit for 2 years at an interest rate of 8% p.a, which is compounded quarterly, then your maturity amount will be calculated as follows-

**A = 300000 (1+ 0.08/4) ^ 4*2**

**A = 300000 * 1.17165**

**A = 351495**

Thus, interest earned on the deposit for 2 years period on quarterly compounded basis is Rs.51,495/-.

**2) Non-Cumulative Fixed Deposit**

For a non-cumulative fixed deposit, interest is calculated only on the principal amount. This mode of investment is ideal for senior citizens and retired individuals since the interest that is withdrawn monthly or quarterly can be used to meet their daily expenses.

The formula used to calculate the yearly interest on an FD is as follows-

SI = P * r * t/100

Where “P” is the principal amount, “r” is the rate of interest per annum, and “t” is the number of years.

For example, if you wish to invest 3 lakhs in a fixed deposit for 2 years at an interest rate of 8% p.a, then your total interest amount on the non-cumulative FD will be calculated as follows-

SI = 300000 * 8 * 2/100

SI = 48000

Thus, interest earned on the deposit for a 3 years period is Rs.48,000/-, and the monthly interest pay-out will be Rs.4,000/- (48,000/12).

**In Conclusion**

Cumulative and Non-Cumulative Fixed Deposits are both excellent tools of securing your finances if you prioritise assured gains over market volatility. If you are a retired individual with financial commitments to fulfil every month, non-cumulative FD is the way to go. On the other hand, if you have a clear plan in mind for your economic affairs and don’t mind locking away a lumpsum amount of money for a few years, you should undoubtedly choose the cumulative FD scheme. In either way, it is advisable to check FD schemes offered by different banks and avail the online FD calculator provision to determine your precise returns.