Compound Interest
Definition
Interest calculated on both the principal and previously accumulated interest.Compound interest is interest earned not just on the original principal but also on interest already added. The more frequently interest is compounded (for example quarterly versus annually), the faster the balance grows. It is the mechanism behind FD maturity values and long-term investment growth.
Related guides
Related terms
- Principal — The original sum borrowed or invested, before interest.
- Fixed Deposit (FD) — A deposit that locks a sum with a bank for a fixed term at a pre-agreed interest rate.
Definitions are general and educational — not advice. Verify current rates, limits and thresholds with the provider or the RBI/SEBI before acting. See our editorial policy.