A Recurring Deposit (RD) is a special savings product offered by banks where you deposit a fixed amount every month for a predetermined period. At maturity, you receive your total deposits plus the compounded interest — making it an excellent disciplined savings tool.
🏦 How Does RD Work?
Open an RD account with any bank or post office, choose your monthly deposit amount (starting from ₹100) and tenure (6 months to 10 years). Interest is compounded quarterly in most banks. At the end of the tenure, you receive the maturity amount in your linked savings account.
📐 RD Interest Calculation Formula
RD maturity is calculated as: M = R × [(1 + i)^n – 1] / (1 – (1+i)^(-1/3)) where M = maturity value, R = monthly installment, i = quarterly interest rate, n = number of quarters.
Simply put: if you deposit ₹5,000/month for 12 months at 7% per annum, you’ll receive approximately ₹62,340 at maturity — earning ₹2,340 as interest on ₹60,000 invested.
📊 RD vs FD vs SIP Comparison
| Feature | RD | FD | SIP (Mutual Fund) |
|---|---|---|---|
| Investment style | Monthly fixed | One-time lump sum | Monthly variable |
| Returns | 6.5–7.5% | 6.5–9% | 10–15% (market-linked) |
| Risk | Zero | Zero | Market risk |
| Tax on returns | As per slab | As per slab | 10% LTCG (equity) |
| Minimum amount | ₹100/month | ₹1,000 lump sum | ₹500/month |
💡 Who Should Open an RD?
- First-time savers who want a no-risk, disciplined savings habit
- Individuals saving for a specific short-term goal (vacation, gadget, emergency fund)
- Students and young earners who don’t yet have a large lump sum to invest
- Those who prefer guaranteed returns over market-linked options
🧮 Calculate Your RD Returns
Use our free RD Calculator to instantly calculate your maturity amount for any monthly deposit, interest rate, and tenure combination.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Consult a qualified financial advisor for personalized guidance.
