A Recurring Deposit (RD) is a systematic savings plan offered by Indian banks where you deposit a fixed amount every month for a predetermined period. Unlike a Fixed Deposit where you invest a lump sum upfront, an RD helps you build savings discipline by committing to regular monthly contributions. At maturity, you receive the total deposited amount plus interest earned.
RDs differ from FDs in several important ways. While FDs require a one-time investment, RDs spread your savings over months or years, making them accessible to salaried individuals who may not have a large lump sum. RD interest rates are generally similar to FD rates for equivalent tenures, and interest is compounded quarterly as per Indian banking norms. Premature withdrawal is allowed but usually attracts a penalty.
The key benefit of RDs is forced savings discipline. Many banks allow RD deposits as low as ₹100 per month, making it an excellent tool for building an emergency fund, saving for a vacation, or accumulating a down payment. Post office RDs and bank RDs both follow similar calculation methods, though rates may vary slightly between institutions.
For example, if you deposit ₹5,000 every month for 3 years (36 months) at 6.5% annual interest, you would deposit ₹1,80,000 in total. With quarterly compounding, your maturity value would be approximately ₹1,97,000, earning roughly ₹17,000 in interest. Use our RD calculator to plan your monthly savings and compare how different tenures and deposit amounts affect your final corpus.