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Recurring Deposit: Things You Need to Know!

For most Indians, contributing in a Recurring Deposit is one of the most trusted and easiest ways to make some investment. It is the most popular among the salaried employees, since it is considered to be a systematic and disciplined way of investing a small amount of the hard earned money keeping in mind some short-term aims and objectives. Not only it is an affordable investment, but also is quite easy to procure. Another reason for the popularity of this scheme is its accessibility. Almost all private and public sector banks offer a Recurring Deposit account. Even if someone who has a very limited means but wants to save, can invest in this scheme. The minimum amount required for an RD is as small as 10 rupees.

Every month the fixed amount is deposited into the RD account. The tenure of a Recurring Deposit scheme is in 3-month multiples. The rate of interest is determined on a yearly basis, however, the compounding is done only after the end of each quarter. Let us take a look at the main features and benefits of a Recurring Deposit.

Interest

Depending on the amount of money that is being deposited, the tenure of the deposit, the rate of interest is offered to the RD account holder.

Tenure or Time Period

The minimum and maximum tenure of a Recurring Deposit account are 6 months and 10 years respectively.

Maturity Amount

When an individual opts to open a RD account, he fixes a time period and an amount that he will pay regularly on a monthly basis. On these two conditions, a rate of interest will be paid to him at the end of the tenure. The amount that he will receive will include the interest that has been accumulated over the tenure. This amount is called the maturity amount.

Withdrawal

Withdrawing money from RD account before the maturity is not allowed.

Availability of Loan

Depending on the policy of the particular bank, a loan of 80%-90% can be taken against the collateral RD amount.

Income Tax

In case the amount of interest is above INR 10,000 the TDS would be deducted. The account holder would also need to mention this when he files the Income Tax Returns.

Penalty

In case the recurring deposit instalment is not paid on time, a penalty is levied on the account holder.

Banks Recurring Deposit Interest Rates in India

The rate of interest for a recurring deposit that an individual receives is dependent on a number of factors, for instance, the amount of money that is being deposited, the tenure of the deposit etc. Almost all banks in India offer their customers the RD Scheme, and each bank tries to give the most competitive rates to lure more and more customers. Though the rates do not appear to be very different, they can make a lot of difference when the amount and tenure of the deposit are more. Let us take a look at the Top Bank Tax saver Recurring Deposit interest rates 2019

Bank1 year3 years5 years5 yrs Plus
HDFC Bank6.85%7.00%7.00%6.00%
Kotak Mahindra6.60%6.50%6.25%6.00%
IndusInd6.85%6.50%6.50%6.50%
City Union7.10%6.85%6.85%6.70%
Yes Bank6.75%6.75%6.75%6.75%
Nainital7.50%7.75%7.5%7.5%
SBI6.7%6.80%6.85%6.85%
Canara Bank6.5%6.20%6%6%
Bandhan Bank7.15%6.8%6.8%6.4%
ICICI Bank6.75%6.5%6.5%6.5%

Recurring Deposit Interest Rates in India for 1 Year

BankRD Interest Rate
HDFC Bank7.30%
SBI6.80%
Canara Bank7.00%
Bandhan Bank7.35%
ICICI Bank7.10%
Yes Bank7.25%
Kotak Mahindra Bank7.30%
Citibank 6.25%
IDBI7.25%
Standard Chartered7.25%
Punjab National Bank6.75%

Top Banks Recurring Deposit Interest Rates in India for Senior Citizens

Most banks offer a competitive rate of interest to their senior citizens account holders. Here is a list of the Interest Rate for an investment that is less than INR 1 crore.

BankRD TenureRates of Interest
HDFC Bank6 months to 10 years6.50%-7.75%
SBI1 Year to 19 years7.20% -7.35%
Canara Bank6 months to 10 years6.85%-7.50%
Bandhan Bank6 months to 10 years7.15%-7.85%
ICICI Bank6 months to 10 years6.50%-7.75%

How Does a Recurring Deposit Interest Calculator Work?

Recurring Deposit Maturity Calculator

Let us find out how a recurring deposit interest calculator work. A Recurring Deposit calculator is a tool that can help the investor to find out the amount that he would receive at the time of maturity of the Recurring Deposit. It is a very convenient and hassle-free way that calculates the amount keeping in mind the factors that affect the maturity amount such as:

  • The principal amount with which the account is opened.
  • Date of opening the account
  • The rate of interest that would be applicable when the deposit begins
  • The age of the investor, as many banks provide a higher rate of interest to investors who are senior citizens
  • The gender of the investor, as many banks provide a higher rate of interest to women investor

How to Calculate Recurring Deposit Interest?

The interest rate in the Recurring Deposit is compounded on a quarterly basis. The formula to calculate Interest, as given by the Indian Bank Association, is: M = R[(1+i) n – 1] 1- (1+i) -1/3 Where, M = Maturity value of the RD, R = Monthly RD instalment to be paid, n = Number of quarters (tenure), i = Recurring deposit interest rate.

The compound interest on the amount of RD is calculated only at the end of the first quarter. The Financial Quarters are:

  • 1st Quarter April to June
  • 2nd Quarter July to September
  • 3rd Quarter October to December
  • 4th Quarter January to March Before this only a simple interest is calculated, the formula for which is PRT, where I stands for Interest, P stands for Principal, R stands for rate applicable (in decimal), T stands for the tenure or time period of the deposit.

For example

Ketan invests INR 1000 in January. At the end of the year, using the formulae given above, his maturity amount at the year-end would be INR 12,801.90

RD Interest Rates: What you Should Know

Interest Rate4.00% - 8.00%
Minimum Deposit AmountINR 10
Tenure of the Investment6 months to 10 years
The frequency of Compound InterestQuarterly
Partial or Midterm WithdrawalNot allowed
Pre-ClosureAllowed, but with a payable charge

BankRD Interest Rates (3 Yrs)
HDFC Bank7.40%
SBI6.80%
Canara Bank6.70%
Bandhan Bank7.40%
ICICI Bank7.50%
Yes Bank7.25%
Kotak Mahindra Bank7.25%
CitibankNA
IDBI7.05%
Standard CharteredNA
Punjab National Bank6.75%

BankRD Interest Rates(3Yrs)
HDFC Bank7.25%
SBI6.85%
Canara Bank6.20%
Bandhan Bank6.40%
ICICI Bank7.25%
Yes Bank7.25%
Kotak Mahindra Bank7.00%
CitibankNA
IDBI6.85%
Standard CharteredNA
Punjab National Bank6.25%

Need to Know Bank Recurring Deposit Rules

When planning to invest in a Recurring deposit, it should be kept in mind that the payment has to be made in a regular manner. Every month the deposit has to be made either in cash/cheque or through the facility of Auto-Debit. The account holder should be wise when selecting the amount and the tenure as a missed payment can reflect badly on the account. The other features of a Recurring Deposit are as follows:

  • The time period of a Recurring Deposit is between 7 days to 10 years.
  • Under the guardianship of an adult, minors too can open a Recurring Deposit account.
  • Depending on the policy of the particular bank, a loan of 80%-90% can be taken against the collateral RD amount.
  • Senior citizens and in some cases women account holders get a higher rate of interest on their RD.
  • The minimum amount required to invest every month in an RD is 10 rupees.

Must Read News about Recurring Deposit in India

The following news about Recurring Deposit is a Must read: “In the 2018 Budget, it was proposed to hike the exemption on the interest income on bank and post office deposits for senior citizens from Rs. 10,000 to Rs. 50,000. This was for all fixed and recurring deposits. Under this announcement, no tax will have to be deducted at source (TDS) on such income under Section 194A. Given that post office schemes and fixed deposits comprise a big chunk of senior citizens' retirement corpus, this will result in a significant rise in their savings if their income falls in the taxable bracket.” As per economic times, economictimes.indiatimes.com/wealth/tax/budget-2018-10-personal-finance-highlights-not-to-be-missed/articleshow/62741731.cms

FAQs on Recurring Deposit

Can I deposit RD online in the post office?

No, as of now there is no such provision. The payment for your RD in the post office can only be done through Electronic Clearing Service (ECS).

Can I get a loan against recurring deposit?

Most banks offer a loan facility with the RD, where the deposit is used as a collateral or security. The loan amount is around 80-90% of the value that has been deposited. You may want to get the specific details from your bank/Post office.

Can I withdraw money from RD account before maturity?

No, withdrawing money from RD account before the maturity is not allowed. If you are in dire need of money, you can get the account closed and get the money that has been acquired so far. You will, however, have to pay a pre-closure fine.

How can I open a recurring deposit in HDFC Bank?

The RD Account can be opened online through net banking. When you open your account, go to “Open Recurring Deposit”, enter the required details and "Confirm”. You can also visit the nearest HDFC Bank branch and open an RD offline too by filling in the required form and depositing the money.

How is RD interest calculated?

The interest in Recurring repost is compounded on a quarterly basis. The formula to calculate Interest, as given by the Indian Bank Association, is: M = R[(1+i) n – 1] 1- (1+i) -1/3 Where, M = Maturity value of the RD, R = Monthly RD instalment to be paid, n = Number of quarters (tenure), i = Recurring deposit interest rate.

Is it good to invest in recurring deposit?

Recurring Deposits are one of the easiest financial product. You deposit a fixed amount, regularly on a fixed date and for a fixed time period. The interest that you earn is also fixed. It can be quite beneficial in planning your short-term objectives. The investment amount can be as small as INR 500 and the period as short as 6 months. You can even avail a loan against your RD account.

Is RD in Post Office taxable?/ Is Post Office RD tax-free?

The 5 year Post Office RD falls under the tax-free benefit given by Section 80C, up to an amount of INR 1.5 lakh. General rules of TDS apply.

Does RD offer a compounded interest?

No, the interest on RD is calculated on a quarterly basis. The rate of interest is already predefined by the respective banks at the beginning of the financial year.

Is RD better than FD?

When it comes to a safe and easy investment, both Recurring Deposit and Fixed Deposit score high. Both of them have a fixed income and they also have almost similar tax benefits. Although an FD may fetch you more interest, it might be not always possible to deposit a lump sum amount. Therefore, depending on whether you wish to invest in small amounts regularly or investing when you have a surplus amount, you can make the decision.

Is Rd in Post Office taxable?

Yes, the Post Office RD Saving Scheme can be availed at all the post offices across India. It is currently earning an interest rate of 7.3% per annum.

Is a recurring deposit taxable?/ Is there any tax on recurring deposit?/ Is RD is tax-free?

The interest that you earn on your RD is not tax-free. In case the amount of interest is above INR 10,000 then TDS would be deducted. You would also need to mention this when you file your Income Tax Returns.

Is recurring deposit under 80c?

No, the investments that are made in a Recurring deposit are not tax deductible under Section 80C.

Is there any tax on recurring deposit?

Yes, if the interest earned from an RD is above Rs. 10,000 in a single financial year, the excessive amount is subject to income tax under TDS or Tax Deducted at Source.

What are RD and FD?/ What is the difference between FD and RD?

The purpose of having a Recurring Deposit is to invest or save money in a regular and systematic way for a specific period of time. You pay a fixed amount every month and at the time of maturity, you receive your money along with an interest. In case of a Fixed Deposit, on the other hand, you invest a lump sum amount as a one-time payment and at the time of maturity, you get your money along with an interest.

What is the maturity amount in RD?/ What is the maturity amount?

When an individual opts to open an RD account, he fixes a time period and an amount that he will pay regularly on a monthly basis. On these two conditions, a rate of interest will be paid to him at the end of the tenure. The amount that he will receive will include the interest that has been accumulated over the tenure. This amount is called the maturity amount.

What is RD account in the post office?

To give a simple yet efficient way of saving and investment to the rural population, Recurring deposits are available in Post Offices as well. These are not only available in far-stretched places but are always most trusted.

What is RD and how it works?

A Recurring Deposit is a scheme that is available at most postal offices and banks. Here, you deposit money recurrently. The purpose of having a Recurring Deposit is to invest or save money in a regular and systematic way for a specific period of time. You pay a fixed amount every month and at the time of maturity, you receive your money along with an interest.

What is recurring deposit in SBI?

At SBI the general rate of a recurring deposit is around 6.85% depending on the tenure of the account. In case of senior citizens, the rate of interest offered is around 7.35%. It should be remembered that the rates mentioned here are revised periodically

What is the benefit of recurring deposit?

A recurring deposit is considered to be a systematic and disciplined way of investing a small amount of the hard earned money keeping in mind some short-term aims and objectives. Not only is it an affordable investment, but also is quite easy to procure.

What is the interest rate of recurring deposit in the post office?

The interest rate of recurring deposit in the post office currently is 7.3%, which is compounded every year. However, these rates are revised regularly.

What is the rate of interest of RD in HDFC Bank?

The rate of interest is calculated for a recurring deposit that an individual receives is dependent on a number of factors, for instance, the amount of money that is being deposited, the tenure of the deposit etc. HDFC Bank offers a rate of interest between 5.75% to 7.25%. It should be remembered that the rates mentioned here are revised periodically.

Which bank gives the highest interest rate in India?/ Which bank gives a higher rate of interest?

The rate of interest you receive is dependent on a few factors like the amount and the tenure of the deposit. Also, these rates are revised on a regular basis. Nainital Bank, Deutsche Bank offers competitive rates when the tenure is above 5 years.

Which bank gives the highest interest rate on current account?

As per reports of February 2019, the highest interest rate on current account is given by DBS Bank that is at 7%.

Which bank gives the highest interest rate on fixed deposit?

The rates offered by different banks may seem lucrative but when selecting a bank to make an investment, you must go through all the significant aspects. Explore all the options and research well so that you can make a prudent choice. The rate of Interest of Fixed Deposits greatly depends on the tenure that is selected. Kotak Mahindra Bank offers 7% interest when the tenure of 180 to 269 days and Yes Bank offers 5% to 7.25% for tenure between 7 days to 10 years.

Which bank has the highest savings interest rate?

In a saving account, the rate of interest is calculated on the basis of the balance in the particular account. Different banks provide different services to their customers too. As per reports of February 2019, the highest interest rate on a savings account is given by DBS Bank Digi Account which ranges between 4% to 7%.

Which bank is best for RD? / Which bank is best for recurring deposit 2018? / Which bank is best for recurring deposit?/ Which bank is best for recurring deposit 2018?

The rate of interest you receive is dependent on a few factors like the amount and the tenure of the deposit. When selecting a bank to make an investment, you must go through all the significant aspects. Axis Bank offers an interest of 7% to 7.6%, DHFL offers an interest of 8% to regular citizens and 8.4% to senior citizens.

Which bank is best for salary account?

When selecting a bank for opening your salary account you must keep in mind the factors like-interest rate offered, Cards provided, Minimum balance required, charges for cards and withdrawals, benefits and the additional facilities. Kotak Mahindra, ICICI, HDFC are considered to be great astray offer special salary account.

Which bank is best for a savings account?

When selecting a bank for opening your saving account you must keep in mind the factors like-interest rate offered, Minimum balance required, Cards provided, charges for Cards and withdrawals, benefits, the location of the bank and the other additional facilities. State Bank of India, Yes Bank, Axis Bank and Citibank are certain banks that are preferred.

Which bank is best for students?

The main objective for a student to have a bank account is probably to keep his money safe along with certain basic benefits.

Which bank is best?

The banking needs of different individuals may be different, what may suit one may not suit the other. Therefore, when choosing a bank all aspects should be kept in mind. The rates offered by different banks may seem lucrative but when selecting a bank to make an investment, you must go through all the significant aspects. Explore all the options and research well so that you can make a prudent choice.

Which bank provides maximum interest on RD?

Investing for a time period between 15 months to 24 months is considered to fetch the highest RD interest rates. Also, certain banks give a higher rate of interest to women and senior citizens. When you make an investment for over 5 years, Deutsche Bank offers an interest rate of 7.25%. However, the rates offered by different banks may seem lucrative but when selecting a bank to make an investment, you must go through all the significant aspects.

Which is the best recurring deposit scheme in India?

Post Office Recurring Deposit gives the investor guaranteed returns that are compounded on a monthly, quarterly or a 5 year period.