A recurring deposit (RD) allows customers to deposit a fixed amount every month for a pre‑selected tenure. RDs are popular because they encourage disciplined savings and offer higher interest than a regular savings account. Tenures typically range between six months and ten years, and investors can start with as little as ₹10. Banks calculate RD interest quarterly, and rates generally fall between 5 % and 8 %, depending on the bank and customer’s age. The principal, along with accumulated interest, is paid out at maturity. Withdrawals before maturity usually incur a penalty or are not permitted, so investors should align their RD term with their financial goals.
Key Aspects of Recurring Deposits
| Feature | Details |
|---|---|
| Monthly deposit | Fixed amount each month; minimum may be ₹10 |
| Tenure | 6 months – 10 years |
| Interest calculation | Usually compounded quarterly |
| Interest rate range | About 5 % – 8 % depending on bank and tenure |
| Premature withdrawal | Often discouraged; penalty may apply |
| Tax | Interest is taxable; TDS applies above ₹40,000 per financial year |
RDs come in various types: regular RDs for residents, senior citizen RDs with higher rates, and RD schemes tailored for minors or specific tenures. Evaluate the interest rates and penalty clauses before opening an RD. Diversifying across FDs and RDs can balance liquidity and returns.
