Most people assume that the moment they open a Fixed Deposit, the interest clock runs on their schedule. Start an FD on the 12th, get interest on the 12th. Start on the 25th, get paid on the 25th. Sounds logical, but that’s not how most banks or NBFCs process interest payouts.
The reality is that interest is credited only on fixed payout dates, no matter when your FD actually begins. This is where many investors get confused, and sometimes disappointed, when their first payout doesn’t arrive on the date they expected.
How interest payout cycles really work
FDs follow standard interest credit cycles. Your chosen payout frequency decides the dates.
- Monthly payout: Interest is credited on the last day of every month.
- Quarterly payout: Interest is credited on the last day of March, June, September and December.
- Half yearly payout: Interest is credited on the last day of March and September.
- Annual payout: Interest is credited on the last day of March.
- Cumulative FD: All the interest is paid only on maturity.
So even if your FD starts in the middle of a month or quarter, your first payout will still align with these fixed dates.
A simple example
In the example where you open an FD on 15 January 2024 with quarterly payouts, the interest you receive on 31 March will not be for the full quarter. You will receive pro rata interest only for the number of days your FD was active in that quarter (15 January to 31 March).
So even though the payout date is fixed, the interest amount is always calculated based on the exact number of days your money stayed invested.
A lesser known exception
There is one practical exception you should know about.
Certain NBFCs do not credit the first interest payout if the FD start date is within 30 days of the scheduled payout date. In such cases, instead of giving you a small pro rata interest for that short period, they skip the payout entirely and adjust the amount in the following cycle. This means your second payout will include both the accumulated pro rata interest of the first short period and the full interest of the next period.
Understanding these payout rules helps you plan your cash flows better and avoid surprises. It also helps you choose the right payout frequency based on your income needs.
So the next time you book an FD, will you check the payout calendar before choosing your interest frequency?