What is Recurring Deposit?
Monthly savings scheme with fixed returns - build discipline and earn interest
What is Recurring Deposit?
Recurring Deposit (RD) is a savings scheme where you deposit a fixed amount every month for a predetermined period and earn interest on your deposits.
It's perfect for people who want to save regularly but don't have a large lump sum to invest. RD helps build financial discipline while earning guaranteed returns.
💡 Simple Example: Save ₹5,000 monthly for 3 years at 6.5% interest = ₹1,95,000 total return on ₹1,80,000 investment.
How Recurring Deposit Works
Choose Amount & Tenure
Decide monthly deposit amount (min ₹100) and tenure (6 months to 10 years)
Monthly Deposits
Deposit fixed amount every month on same date (auto-debit available)
Interest Calculation
Interest calculated monthly and compounded quarterly
Maturity Payout
Receive principal + interest as lump sum on maturity
RD vs Other Savings Options
| Feature | RD | FD | SIP | Savings A/c |
|---|---|---|---|---|
| Investment Type | Monthly | Lump sum | Monthly | Flexible |
| Returns | 6-7% | 6-7% | 12-15% | 3-4% |
| Risk | Low | Low | High | Low |
| Liquidity | Limited | Limited | High | High |
| Discipline | High | Medium | High | Low |
RD Interest Calculation
RD Maturity Formula
M = R × [(1 + i)^n - 1] ÷ (1 - (1 + i)^(-1/3))
M = Maturity Amount, R = Monthly Deposit, i = Interest Rate/12, n = Number of months
Example Calculation
- • Monthly Deposit: ₹5,000
- • Tenure: 3 years (36 months)
- • Interest Rate: 6.5% per annum
- • Total Deposits: ₹1,80,000
- • Interest Earned: ₹15,000
- • Maturity Amount: ₹1,95,000
Interest Features
- • Compound interest quarterly
- • Same rate as Fixed Deposit
- • Interest calculated monthly
- • No interest on premature closure
- • Senior citizens get 0.5% extra
RD Benefits & Limitations
✓ Benefits
- • Builds saving discipline
- • Guaranteed returns
- • Low minimum amount (₹100)
- • Flexible tenure options
- • Auto-debit facility
- • Safe investment option
- • Loan against RD available
- • Senior citizen benefits
⚠ Limitations
- • Lower returns vs equity
- • Interest is taxable
- • Penalty for missed deposits
- • Limited liquidity
- • Inflation impact on returns
- • No tax benefits available
- • Fixed interest rate risk
- • Premature closure penalty
RD Calculator
Current RD Interest Rates
SBI
1-2 years
HDFC Bank
1-2 years
ICICI Bank
1-2 years
*Rates are indicative and subject to change.
Popular RD Tenures
Frequently Asked Questions
What happens if I miss an RD installment?
Banks charge penalty (₹5-50 per default). Multiple defaults may lead to account closure. Some banks offer grace period of 15 days.
Can I withdraw RD before maturity?
Yes, but with penalty. Premature closure usually results in 1% lower interest rate and penalty charges. Some banks allow after 6 months.
Is RD better than SIP?
RD offers guaranteed returns (6-7%) with no risk, while SIP offers higher potential returns (12-15%) with market risk. Choose based on risk appetite.
Can I get loan against RD?
Yes, most banks offer loan up to 80-90% of RD value at 1-2% above RD interest rate. Useful for emergency needs without breaking RD.
Is RD interest taxable?
Yes, RD interest is taxable as per your income tax slab. TDS is deducted if interest exceeds ₹40,000 per year (₹50,000 for senior citizens).
Can I increase RD amount later?
No, RD amount is fixed at opening. To increase savings, you need to open a new RD account with higher amount or additional RD.