Having a steady monthly income is something many people aim for. Fixed Deposits (FDs) are a trusted choice that’s been around for years. They’re secure and reliable, offering you consistent returns. What makes them so popular is how easily they can turn your savings into a regular income without risks. In this blog, we’ll explore how FDs can help you generate monthly income. So, let’s look at why they’re such a dependable choice for financial peace of mind.
Gold Rate
13 May 2025
Monthly interest payout of FD
The monthly interest payout means the bank or financial institution pays the interest earned on your deposit to you every month instead of adding it to the principal amount. This option provides a regular income stream while keeping the principal amount intact until the end of the FD tenure. It is available with various account types, whether it’s a premium or zero-balance digital savings account.
Working of FDs with a monthly payout
To calculate the monthly payout from an FD:
Formula:
Monthly payout = (Principal x Annual Interest Rate) ÷ 12
Example:
If you deposit ₹5,00,000 at 6% annual interest:
Monthly payout = (5,00,000×6%) ÷ 12 = ₹2,500
You can select a tenure based on your financial flexibility, ranging from months to years.
Benefits of FDs with monthly interest payout
Whether for short-term or long-term financial needs, fixed deposits with monthly payouts are beneficial in the following ways:
- Can choose longer tenures
With FDs offering tenures ranging from a few months to several years, you can align your deposit with your financial goals. Longer tenures not only ensure steady payouts over an extended period but also often come with slightly higher interest rates, maximising your returns.
- Provides more liquidity with premature withdrawals
With FDs, you can take out your money before it matures if you need it, which is super helpful in emergencies. Sure, there might be a small penalty for doing this, but it’s good to know your money isn’t completely locked away and is there when you need it most.
- Great for those looking for dependable cash flow
Monthly interest payouts are ideal for individuals who need regular income—like retirees, freelancers or those supplementing their salaries. The consistent payouts help cover daily expenses.
- Can avail overdraft facilities
You can use your FD as security to get an overdraft, which lets you borrow money without taking out your deposit. This comes in really handy for dealing with sudden expenses while still earning interest on your FD.
How to leverage the interest received?
Monthly interest received from Fixed Deposits provides a steady cash flow that can be strategically used to enhance your financial well-being. Here’s a quick list of smart ways to make the most of it:
- Cover daily expenses: Use it for routine costs like groceries, bills or rent.
- Reinvest: Redirect it into mutual funds, recurring deposits or another FD.
- Build an emergency fund: Save it to create a financial safety net for unexpected needs.
- Supplement retirement income: Support a comfortable lifestyle without dipping into savings.
- Clear debts: Use it to settle loans or credit card dues faster.
- Pay insurance premiums: Allocate it towards life or health insurance premiums.
- Indulge in small goals: Spend it on hobbies, travel or personal interests.
Last word
To make the most of your monthly FD interest, think beyond just using it for immediate needs. Consider aligning it with your financial goals. For instance, if you’ve always wanted to start a side business, fund a dream project or save for a major milestone like your child’s education or your retirement, these monthly payouts can play a key role.
By planning and using this steady income strategically, you’re not just enjoying the benefits now—you’re also setting yourself up for something more meaningful in the future. With a little foresight, even small, regular payouts can make a big difference.
