What is Non Cumulative FD?
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Good question, I remember wondering the same thing when I was exploring fixed deposit options a while ago. Let me explain it the way I understood what is non cumulative fd.
A non-cumulative FD is a type of fixed deposit where the interest doesn’t get added back to your principal. Instead, the bank pays you the interest at regular intervals like monthly, quarterly, half-yearly, or annually, depending on what you choose when opening the FD.
So, let’s say you invest ₹1 lakh in a non-cumulative FD for 3 years at 7% interest, with quarterly payouts. Every 3 months, the bank will credit your account with the interest earned for that quarter which is great if you’re looking for regular income, maybe for monthly expenses or to supplement your pension if you’re retired.
This type of FD is great for people like retirees or those who want a regular income from their investment, instead of waiting for a lump sum at maturity.