Why is the effective return on FD higher than the nominal rate?

Bank FD Calculator India - Quarterly Compounding Fixed Deposit Tool | myfinedu.com

Investment

Bank Fixed Deposit (FD) Calculator

Verified Indian financial mathematics, statutory regulations, and step-by-step actionable breakdowns.

Tags:#Fixed Deposit#Quarterly Compounding#Bank Interest#DICGC

Bank Fixed Deposit (FD)

Official Indian Quarterly Compounding Model: A = P(1 + r/4)^(4n)

Deposit Amount (Principal)₹2,00,000

Annual Interest Rate (% p.a.)7.0%

Tenure3 Years

Principal

₹2,00,000

Total Interest

₹46,288

Maturity Amount

₹2,46,288

Mathematical Formula & Calculation Engine

Indian banks calculate FD interest on a quarterly compounding frequency using the standard compounding formula.

A = P × [1 + (r / 4)]^(4 × n)

Why Use the Bank FD?

Guaranteed return with DICGC insurance up to ₹5 Lakhs

Flexible tenures from 7 days to 10 years

Overdraft loans available up to 90% of deposit balance

Bank FD FAQs

Because Indian banks compound interest every quarter (4 times a year), interest earned in the first quarter starts earning its own interest in subsequent quarters.

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