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Savings, Current, RD and FD Accounts: ICSE Class 9

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Commercial StudiesICSE Class 9 · Banking

Savings, Current, Recurring Deposit and Fixed Deposit Accounts Compared (ICSE Class 9)

Updated 18 October 2026 · Fact-checked

A savings account encourages saving by individuals and pays interest; a current account serves businesses with frequent transactions and usually pays no interest; a recurring deposit takes a fixed sum every month for a fixed period; a fixed deposit holds a lump sum for a fixed period at a higher interest. Learn the differences on the bases of purpose, deposits, withdrawals, interest, overdraft, cheque book and period.

Understand Savings, Current, Recurring Deposit and Fixed Deposit Accounts Compared

Savings account. Meant to encourage saving by individuals (salaried people, students, pensioners, households). Interest is paid on the balance; deposits and withdrawals can be made at any time though free transactions may be limited; a minimum balance may be required; a cheque book, debit card and online banking are provided; an overdraft is not usually given.

Current account. Meant for businesses and organisations with frequent and large transactions. Any number of deposits and withdrawals a day; usually no interest; a higher minimum balance; an overdraft can be granted; a cheque book is essential.

Recurring deposit (RD). A fixed amount is deposited every month for a fixed period (for example 12 to 120 months), and the total deposits plus interest are paid on maturity. It suits regular earners who want to save part of their income. Withdrawal before maturity is not allowed except by premature closure with a penalty or reduced interest.

Fixed deposit (FD, term deposit). A lump sum is deposited for a fixed period (a few days to several years) and earns a higher rate than a savings account. It cannot be withdrawn before maturity except by premature closure, usually at a lower rate. Loans can often be taken against an FD.

Comparison.

  • Purpose: saving; frequent business transactions; regular monthly saving; investing a lump sum.
  • Deposits: any time; any time and any number; fixed amount every month; one lump sum.
  • Withdrawals: any time; any number; only at maturity; only at maturity.
  • Interest: low; usually none; higher than savings; usually the highest of the four.
  • Overdraft: not usually; available; no; a loan against the FD is possible.
  • Cheque book: provided; essential; not given; not given.

Interest sums (assumed rates, simple interest).

  • FD: SI = P x R x T / 100 and Maturity value = P + SI.
  • RD: Interest = P x n(n + 1)/2 x r / 1200, where P is the monthly deposit, n the number of months and r the rate per cent a year. Maturity value = P x n + Interest.

Neighbouring topics: the functions of a commercial bank are on the previous page of this chapter.

Savings, Current, Recurring Deposit and Fixed Deposit Accounts Compared: key facts

FD
SI = P x R x T / 100 | Maturity value = Principal + SI
T in years.
RD interest
Interest = P x n(n + 1) / 2 x r / 1200 | P monthly deposit, n months, r per cent per annum
Simple interest on each instalment.
RD maturity
Maturity value = P x n + Interest | total deposits plus interest
Total deposits = P x n.
Matching accounts
Savingshousehold
currenttrader
RDregular saver
FDlump sum
Choose by need.

Savings, Current, Recurring Deposit and Fixed Deposit Accounts Compared in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Lump sum or regular saving

Suppose Reena has Rs 40,000 she will not need for two years, while her brother can save Rs 2,400 every month for ten months.

Which account suits each?

Try it first, then show the solutionSolution
  1. A lump sum that is not needed for a fixed period suits a fixed deposit.
  2. Regular monthly saving suits a recurring deposit.

Answer: Reena: fixed deposit; her brother: recurring deposit.

Memory hook: Lump sum: FD. Monthly: RD.

Tricks to remember Savings, Current, Recurring Deposit and Fixed Deposit Accounts Compared

Short memory aids. Say each one aloud once, then use it on a question the same day.

  • S-C-R-F

    Savings for Self, Current for Commerce, Recurring for Regular, Fixed for a Fortune (lump sum).

    Use it when: Matching accounts.

  • Current has no interest

    Current accounts usually pay none, but allow overdraft.

    Use it when: Current account.

  • Lock it longer, earn it larger

    Fixed deposits are locked and pay more.

    Use it when: FD.

Savings, Current, Recurring Deposit and Fixed Deposit Accounts Compared: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Interest on a current account · 1 mark · MCQBoard level

Which account usually pays no interest?
(a) savings (b) current (c) recurring deposit (d) fixed deposit

Try it first, then show the solutionSolution
  1. A current account is meant for frequent transactions and usually pays no interest.

Answer: (b) current

Example 2: FD interest · 3 marks · Short answerHarder board level

A fixed deposit of Rs 50,000 earns 7 per cent per annum simple interest for 3 years. Find the interest and the maturity value.

Try it first, then show the solutionSolution
  1. SI = 50,000 x 7 x 3 / 100. (1 mark)
  2. SI = Rs 10,500. (1 mark)
  3. Maturity value = 50,000 + 10,500 = Rs 60,500. (1 mark)

Answer: Interest Rs 10,500; maturity value Rs 60,500

Example 3: RD maturity · 4 marks · Short answerHarder board level

Anil deposits Rs 1,500 every month for 12 months in a recurring deposit at 6 per cent per annum simple interest. Find the interest and the maturity value.

Try it first, then show the solutionSolution
  1. n(n + 1) / 2 = 12 x 13 / 2 = 78. (1 mark)
  2. Interest = 1,500 x 78 x 6 / 1,200 = 7,02,000 / 1,200 = Rs 585 (1,500 x 78 = 1,17,000; 1,17,000 x 6 = 7,02,000). (2 marks)
  3. Maturity value = 1,500 x 12 + 585 = 18,000 + 585 = Rs 18,585. (1 mark)

Answer: Interest Rs 585; maturity value Rs 18,585

Example 4: Case study: choose the account · 4 marks · Case-basedHOTS / competency

Choose the most suitable account with a reason: (i) a wholesaler with many daily payments; (ii) a student whose pocket money comes in small sums at any time; (iii) a clerk who wants to save Rs 2,000 a month for two years; (iv) a family with Rs 3,00,000 not needed for two years.

Try it first, then show the solutionSolution
  1. (i) Current account: unlimited transactions and overdraft.
  2. (ii) Savings account: deposits and withdrawals at any time, with interest.
  3. (iii) Recurring deposit: a fixed sum every month for a fixed period.
  4. (iv) Fixed deposit: a lump sum for a fixed period at a higher interest.

Answer: (i) current (ii) savings (iii) recurring deposit (iv) fixed deposit

Example 5: Savings versus FD · 3 marks · Short answerHarder board level

Rs 40,000 is kept for 2 years either in a savings account at 3 per cent a year or in a fixed deposit at 6.5 per cent a year (assumed rates, simple interest). Find the interest in each and the difference.

Try it first, then show the solutionSolution
  1. Savings: 40,000 x 3 x 2 / 100 = Rs 2,400. (1 mark)
  2. FD: 40,000 x 6.5 x 2 / 100 = Rs 5,200. (1 mark)
  3. Difference = 5,200 - 2,400 = Rs 2,800 more in the FD. (1 mark)

Answer: Rs 2,400 against Rs 5,200; the FD earns Rs 2,800 more.

Where students lose marks in Savings, Current, Recurring Deposit and Fixed Deposit Accounts Compared

The slips examiners see most often, and what to write instead.

  • Mistake: Using total months as n in the wrong place

    n(n + 1) / 2 is not applied.

    Wrong working

    Interest = 1,500 x 12 x 6 / 1,200

    Right working

    Interest = 1,500 x 78 x 6 / 1,200 = Rs 585

    Do this: Each instalment earns interest for a different time.

    Usually costs: 2 marks

  • Mistake: Forgetting to add the deposits to the interest

    Maturity is taken as interest only.

    Wrong working

    Maturity value Rs 585

    Right working

    Maturity value = 18,000 + 585 = Rs 18,585

    Do this: Add the total deposits.

    Usually costs: 1 mark

  • Mistake: Giving interest on a current account

    Savings features are applied.

    Wrong working

    Current accounts pay high interest

    Right working

    Current accounts usually pay none

    Do this: Current: commerce, no interest.

    Usually costs: 1 mark

Exam tips

  • Compare accounts on matching bases: purpose, deposits, withdrawals, interest, overdraft, cheque book.
  • Write the formula, substitute and give the answer with a unit for every sum.
  • State the assumption "rates assumed" in your working.
  • For a suitable account, give the need and the matching feature.

Practice questions on Savings, Current, Recurring Deposit and Fixed Deposit Accounts Compared

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

  1. Q1 · 1 mark · MCQBoard level

    Which account requires a fixed sum to be deposited every month?
    (a) savings (b) current (c) recurring deposit (d) fixed deposit

    Hint

    Regular saving.

    Answer

    (c) recurring deposit

  2. Q2 · 2 marks · Very short answerBoard level

    Why is a cheque book essential in a current account?

    Hint

    Think of business payments.

    Answer

    A trader makes many payments by cheque every day, so the cheque book is the main way of operating the account.

  3. Q3 · 4 marks · Short answerHarder board level

    Neha deposits Rs 2,400 every month for 10 months in a recurring deposit at 5 per cent per annum simple interest. Find the interest and the maturity value.

    Hint

    n(n + 1) / 2 for n = 10 is 55.

    Answer

    Interest = 2,400 x 55 x 5 / 1,200 = 6,60,000 / 1,200 = Rs 550. Total deposits = 2,400 x 10 = 24,000. Maturity value = 24,000 + 550 = Rs 24,550.

  4. Q4 · 3 marks · Short answerHarder board level

    A trader's current account has Rs 12,000 and the bank allows him to draw Rs 50,000 in all under an overdraft. Find the interest for 3 months at 12 per cent a year on the overdrawn amount.

    Hint

    Only the excess carries interest.

    Answer

    Overdrawn = 50,000 - 12,000 = Rs 38,000; interest = 38,000 x 12 x 3 / (100 x 12) = Rs 1,140.

  5. Q5 · 3 marks · Short answerHOTS / competency

    A man closes his fixed deposit three months before it matures. Explain what he is likely to receive and why.

    Hint

    Think of the penalty.

    Answer

    He will usually receive the deposit with interest at a reduced rate, because the bank allows premature closure with a penalty. The deposit was meant to stay for the fixed period, which is why it earns a higher rate than a savings account.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

  1. 1.Which account suits a trader?Show answer

    Current account.

  2. 2.Which account has the highest interest, usually?Show answer

    Fixed deposit.

  3. 3.What is premature closure?Show answer

    Closing an RD or FD before maturity, usually with a penalty.

  4. 4.Maturity value of an RD?Show answer

    Total deposits plus interest.

  5. 5.Does an RD give a cheque book?Show answer

    No.

  6. 6.Can a loan be taken against an FD?Show answer

    Often yes.

Savings, Current, Recurring Deposit and Fixed Deposit Accounts Compared: frequently asked questions

Is the RD interest formula part of the syllabus?

The syllabus asks for meaning and difference only; the sums here show how the accounts differ in earning.

Why does an RD use n(n + 1) / 2?

The first instalment earns interest for n months, the next for n - 1, and so on.

Is a savings account for businesses?

It is meant for individuals; businesses use current accounts.