₹50,000 lump sum, 8%, 10 years. Monthly rests: ₹1,07,946. Yearly rests: ₹1,10,982. Same money, same rate, same decade — ₹3,036 conjured by compounding frequency alone. Banks print the frequency in sanction letters hardly anyone reads, then pay accordingly. This guide explains rests, compares monthly vs quarterly vs yearly with worked figures, and shows payout-vs-cumulative choices that change effective yield.
Part of the India wealth & tax guide. Test frequencies in the compound interest calculator; contrast with monthly SIPs in SIP growth.
Rests explained: A=P×(1+r/f)^(f×t)
Frequency f divides the annual rate into smaller, more frequent credits: f=12 monthly, 4 quarterly, 2 half-yearly, 1 yearly. More rests = interest earning interest sooner. The formula's quiet power: doubling frequency from yearly to half-yearly gains more than doubling again to quarterly — diminishing returns, so don't overpay for daily rests that add basis points. What matters is knowing your product's f: FDs typically quarterly, savings accounts quarterly-or-monthly, PPF yearly (April balance rule!).
Worked: ₹50,000 at 8% for 10 years
| Rest | Maturity | vs yearly |
|---|---|---|
| Yearly | ₹1,07,946 | — |
| Half-yearly | ₹1,09,556 | +₹1,610 |
| Quarterly | ₹1,10,402 | +₹2,456 |
| Monthly | ₹1,10,982 | +₹3,036 |
Reproduce every row with the frequency switcher, then test your own principal. Note the pattern for negotiations: asking a lender for monthly rests on deposits (or yearly rests on loans — the mirror image favors borrowers) is free money via arithmetic.
Payout vs cumulative: the same rate, different cash
Cumulative FDs reinvest quarterly interest (the table above); payout FDs credit it to your account (monthly/quarterly income, no compounding). A 7% cumulative FD yields ~7.19% effective; the payout twin yields exactly 7% as cash flow. Retirees needing income choose payout; accumulators choose cumulative — mixing them up silently forfeits a fifth of a percent yearly. Sanction letters define rests explicitly; the word “cumulative” without a rest frequency deserves one pointed question before signing (see FD mechanics).
Informational purposes only — not financial advice. Verify rest definitions in your sanction letter; product variants differ. See /terms.