Judged on returns alone, the pigmy deposit loses. At both banks we checked, the same institution pays two to three times more on an ordinary term deposit than it pays on its own daily-collection scheme.
That is not a scandal and it is not a reason to dismiss the product. The gap is the price of a service. Somebody walks to your door, every working day, and asks you for money. What follows is the comparison in full: how each product collects, what each pays, what can go wrong, how hard it is to get out, who pays for the collection, and who each one genuinely suits.
The one difference everything else follows from
A pigmy deposit is collected. An agent appointed by the bank or society walks a fixed route and takes cash from your hand, usually every working day.
A recurring deposit is paid. You commit to a fixed monthly instalment and the bank pulls it from your account by standing instruction on a fixed date. Cosmos Bank's recurring deposit page makes the point in its own words: with a standing instruction you are free from personally paying the instalment every month.
A SIP is also paid, into a mutual fund scheme rather than into a deposit. AMFI describes it as investing through standing instructions to debit your bank account every month, with instalments starting from as little as ₹500.
So a recurring deposit and a SIP both assume you already hold a bank account with money sitting in it on the due date. A pigmy deposit assumes only that you have cash in your hand at the end of a working day. For a vegetable seller, an auto driver or a small shopkeeper who earns and spends in cash, that is not a detail. It is the entire product.
What the daily schemes pay
Interest rates change and the co-operative sector changes them often. Every figure here is what the institution published on its own page, read on 9 September 2026.
| Institution | Rate published | Tenure | Deposit size |
|---|---|---|---|
| Canara Bank — Nitya Nidhi Deposit | 2.00% p.a., on maturity, w.e.f. 01.10.2022 | 63 months only | Min ₹50 per month; max ₹1,000 per day |
| Cosmos Bank (urban co-operative) | 3.00% p.a. | 12 months | ₹100 to ₹5,000 per day |
| Latur Urban Co-operative Bank | 2% after 1 year, 3% up to 2 years, 5% for 3 years | 12, 24 or 36 months | From ₹10 per day |
| Chikkamagaluru DCC Bank | 1% p.a. | 12 to 60 months | Min ₹100 |
The spread across four institutions runs from 1% to 5%. There is no such thing as "the pigmy rate", and anyone quoting you one without naming the bank and the date is guessing.
The same bank, two products
The fairest comparison is not pigmy against some other bank's recurring deposit. It is pigmy against what the very same institution pays on a deposit it does not have to come and collect.
| Institution | Daily-collection scheme | Term deposit at a comparable tenure |
|---|---|---|
| Canara Bank | 2.00% (63 months) | 6.25% for 5 years and above to 10 years, w.e.f. 17.03.2026 |
| Cosmos Bank | 3.00% (12 months) | 7.00% for 12 to 16 months, w.e.f. 03.09.2026 |
Canara Bank's recurring deposit page states that RD interest is compounded quarterly at the rates applicable to term deposits of the various tenures; Cosmos Bank's recurring deposit page publishes no separate rate and directs the reader to the same interest-rate card. The term-deposit column is therefore the closest published proxy for what a recurring deposit at that bank pays.
A SIP has no column here, and that is the honest answer rather than a gap in our research. A mutual fund does not promise a rate. Its value moves with the market, returns are not assured, and past performance is not a forecast. AMFI is explicit that rupee cost averaging — the main argument for investing monthly — does not assure a profit and does not protect against losses in a falling market. We do not project SIP returns anywhere on this site.
Why the headline gap slightly understates the difference
Two further things work against the daily scheme, and both are easy to miss.
First, a recurring deposit instalment is credited on one date and starts earning from that date. A pigmy account receives the same monthly outlay in slices spread across the month, so on average that money has been with the institution for a shorter time when interest is worked out. Comparing the two on headline rates alone therefore flatters the pigmy scheme a little. The effect is second-order — the rate gap itself does most of the damage — but it runs the same way.
Second, institutions do not share a single convention for applying pigmy interest. None of the four scheme pages in the table above states how its rate is applied: whether interest is worked out on the daily balance, credited quarterly, or paid as simple interest at maturity. Two schemes advertising the same percentage can pay different amounts. Ask your institution which method it uses, in writing, before you judge any figure — including one from a calculator.
Somebody has to pay for the walk
This is the part that explains everything above, and it is rarely said plainly. Pigmy interest is low because the institution is paying a person to walk the route.
The agent is paid a commission on what they collect, typically in the range of 2.5% to 3%. Maharashtra's Cooperation Department capped it at 2.5% for credit co-operatives from 1 April 2026 and the Cooperation Commissioner raised the cap to 3% in June 2026 after agents and federations objected. Those figures cover roughly two lakh agents serving about one crore families across some 16,000 credit co-operatives in that state alone.
Where that commission lands differs by institution type, and the distinction matters:
- Banks pay it themselves. Canara Bank's deposit policy prohibits paying any commission or brokerage on deposits, with a stated exception for commission paid to agents employed to collect door-to-door deposits under a special scheme. It is a cost the bank carries, which is precisely why the rate it can offer on that product is lower.
- In Maharashtra's credit societies, it may not work that way. The chairman of the state federation of credit societies is on record that the commission paid to collection agents is typically borne by customers rather than by the institutions. The mechanism is not documented anywhere we could find, so ask.
A recurring deposit and a SIP have no collector, and no commission of this kind. The bank's standing instruction and the fund's mandate both cost the institution almost nothing to run. That saving is the difference you see in the rate.
What can go wrong, and how fast you can leave
| Pigmy deposit | Bank recurring deposit | Monthly SIP | |
|---|---|---|---|
| Who collects | An agent, in cash, at your door | Standing instruction from your bank account | Standing instruction from your bank account |
| Return | Contracted rate, low | Contracted rate | Not fixed; can fall as well as rise |
| Protection if the institution fails | DICGC cover up to ₹5 lakh per depositor at a co-operative bank; primary co-operative societies are not insured by DICGC | Same DICGC cover; recurring deposits are explicitly included | No deposit insurance; market risk sits with you |
| Extra risk to watch | The agent handles your cash before the branch sees it | Missed or delayed instalments attract a penalty | Value fluctuates daily |
| Getting out early | Canara: interest cut to 0.10%–1.00% by slab, plus a 0.05% penalty on interest if closed inside 12 months. Latur Urban: 5% deducted from the deposit before 6 months. Chikkamagaluru DCC: no interest at all if closed inside 12 months | Canara: 1% levied on premature closure, and the deposit earns 1% below the rate ruling on the date of deposit | Units are sold on any business day at that day's NAV, subject to the scheme's exit load — often around 1% within the first year, but scheme-specific |
Deposit insurance is a real dividing line within the pigmy category: a pigmy account at a licensed co-operative bank carries the ₹5 lakh DICGC cover, while the same-looking product at a patpedhi, a credit society or a Nidhi company does not. And the early-exit penalties on daily schemes are severe enough that a pigmy deposit closed at nine months can return less than the cash you handed over.
Who each one is genuinely for
A pigmy deposit suits someone whose money is in cash and whose savings would otherwise not survive the week. If your income arrives daily in notes, if a trip to the branch costs you half a day's trade, and if the honest alternative is spending the money, then the collector at the door may be worth more to you than the interest gap in the tables above. That is a real trade, not a consolation.
A recurring deposit suits someone who already has a bank account with a predictable monthly surplus. If you can spare a fixed amount on a fixed date and you want the return contracted in advance, you are paying for a collection service you do not need. The same institution will pay you materially more to save the ordinary way.
A SIP suits someone saving for a goal several years away who understands and accepts that the value can fall. It is not a substitute for either deposit, because it makes no promise about the amount you will get back. It is a different kind of instrument, and only you can judge whether that risk fits your circumstances.
Nothing on this page is financial advice, and we do not recommend a product to anyone. Pigmity is an information site. It is not a bank, a society or a distributor, and it does not sell any of the three products described here.
What we could not establish
- How each institution computes pigmy interest. None of the four scheme pages in the table above states its method. Across our directory, 6 of the 18 institutions state one, and the methods they state differ; see our rate table.
- A current India Post recurring deposit rate from a primary source. The India Post and National Savings Institute pages would not load for us on 9 September 2026. Widely reported figures exist; we are not repeating a rate we could not read on an official page.
- Whether, and how, Maharashtra credit-society members bear the agent's commission. The federation's chairman says customers typically bear it. No circular, passbook entry or scheme document we found sets out the mechanism.
- How many pigmy depositors would otherwise save at all. The case for the product rests on that counterfactual, and no survey we could find measures it.