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What is Recurring Deposit?

A Recurring Deposit or RD as it is commonly called is a unique term deposit offered by banks. It is an investment tool which permits those with an ability to make regular deposits earn decent returns on their investment. Basically consisting of regular deposits and an interest component, a Recurring Deposits provides flexibility and ease of use to individuals. Account holders can choose to invest a particular amount each month, ensuring that they have sufficient income for an emergency, with the RD earning decent interest on the amount. Given the fact that FDs are rigid and are not ideal for short terms, a Recurring Deposit is an ideal investment cum savings option.

Almost all major banks in India offer a Recurring Deposit Account, with the term typically ranging between 6 months and 10 years, providing individuals an opportunity to choose a term as per their needs. Competition among banks to attract new customers has ensured that interest rates are competitive, helping an investor earn a good amount on maturity. The interest rate, once determined, does not change during the tenure, with the Reserve Bank of India ensuring that strict guidelines are followed. On maturity, the individual will be paid a lumpsum amount which includes the regular, periodic investments and the interest earned on them.

Compare and Get Best Recurring Deposit (RD) Interest Rates in India

When investing in a recurring deposit, the first thing to look for is the interest rates that are being offered. The table below will let you examine the top interest rates from various banks in Indian according to the tenure of the RD. (Interest rates as of 03 Dec 2016) - Check RD Rates Now

Bank Tenure Highest Interest Rate  

Allahabad Bank
1 year to less than 2 years 7% Get Allahabad Bank RD Rates

Andhra Bank
1 year to 2 years 7.15% Get Andhra Bank RD Rates

Axis Bank
1 Year to 5 years 7.25% Get Axis Bank RD Rates

Bandhan Bank
1 Year to 3 years 8.25% Get Bandhan Bank RD Rates

Bank of Baroda
1 Year 7% Get Bank of Baroda RD Rates

Bank of India
1 Year to 3 Years 7.10% Get Bank of India RD Rates

Bank of Maharashtra
3 Years 6.8% Get Bank of Maharashtra RD Rates

Bharatiya Mahila Bank
1 Year to 3 years 7.25% Get Bharatiya Mahila Bank RD Rates

Canara Bank
Above 1 year to less than 2 years 7.30% Get Canara Bank RD Rates

Central Bank of India
1 Year to 2 years 7.50% Get Central Bank of India RD Rates

CitiBank
1 Year to 2 years 6.25% Get CitiBank RD Rates

City Union Bank
1 Year 7.1% Get City Union Bank RD Rates

Corporation Bank
1 Year to less than 3 years 7.10% Get Corporation Bank RD Rates

DBS Bank
5 years and above 7.20% Get DBS Bank RD Rates

Dena Bank
2 to 3 years 6.75% Get Dena Bank RD Rates

Deutsche Bank
5 years 7.75% Get Deutsche Bank RD Rates

Dhanalakshmi Bank
1 Year 7.25% Get Dhanalakshmi Bank RD Rates

DHFL Bank
1 Year to 10 years 8.6% Get DHFL Bank RD Rates

Federal Bank
3 years 7.35% Get Federal Bank RD Rates

HDFC Bank
1 Year to 5 years 7% Get HDFC Bank RD Rates

ICICI Bank
27 Months to 5 years 7% Get ICICI Bank RD Rates

IDBI Bank
1 Years to 5 years 7.15% Get IDBI Bank RD Rates

Indian Bank
1 year 6.5% Get Indian Bank RD Rates

Indian Overseas Bank
1 Year to 2 years 7.25% Get Indian Overseas Bank RD Rates

IndusInd Bank
5 year to 10 years 7.25% Get IndusInd Bank RD Rates

Jammu and Kashmir Bank
1 Year to 3 years 7.3% Get Jammu and Kashmir Bank RD Rates

Karnataka Bank
1 Year to 2 years 7.25% Get Karnataka Bank RD Rates

Karur Vysya Bank
6 Months to 3 Years and above 7% Get Karur Vysya Bank RD Rates

Kotak Mahindra Bank
1 Year to 33 Months 7.25% Get Kotak Mahindra Bank RD Rates

Lakshmi Vilas Bank
1 year to less than 2 Years 7.70% Get Lakshmi Vilas Bank RD Rates

Nainital Bank
1 year to less than 2 Years 7.90% Get Nainital Bank RD Rates

Oriental Bank of Commerce
1 year to less than 2 Years 7.15% Get Oriental Bank of Commerce RD Rates

Post Office
1 Year to 5 years 7.40% Get Post Office RD Rates

Punjab and Sind Bank
1 year to 2 years 7.10% Get Punjab and Sind Bank RD Rates

Punjab National Bank
Above 1 year to 2 years 7.05% Get Punjab National Bank RD Rates

Saraswat Bank
Above 1 Years to 3 years 7.25% Get Saraswat Bank RD Rates

South Indian Bank
1 Year to 3 years 7.50% Get South Indian Bank RD Rates

State Bank of Bikaner and Jaipur
456 days to less than 2 years 6.95% Get State Bank of Bikaner and Jaipur RD Rates

State Bank of Hyderabad
211 days to less than 1 year 7% Get State Bank of Hyderabad RD Rates

State Bank of India
456 days to less than 2 years 6.95% Get State Bank of India RD Rates

State Bank of Mysore
211 days to less than 1 year 7% Get State Bank of Mysore RD Rates

State Bank Of Travancore
5 Yeras 7% Get State Bank Of Travancore RD Rates

Syndicate Bank
Above 1 year to 2 years 7% Get Syndicate Bank RD Rates

Tamilnad Mercantile Bank
1 Year 7.15% Get Tamilnad Mercantile Bank RD Rates

UCO Bank
1 Year to 3 years 7.50% Get UCO Bank RD Rates

Union Bank of India
1 Year 7.3% Get Union Bank of India RD Rates

United Bank of India
1 Year to 3 Years 6.75% Get United Bank of India RD Rates

Vijaya Bank
1 Year 7.50% Get Vijaya Bank RD Rates

Yes Bank
1 Year to 10 years 7.10% Get Yes Bank RD Rates

Features of Recurring Deposit Account

RD offers you a fixed interest on the invested amount at a specific frequency till the pre-determined term or up on maturity. At the end of the term, the amount upon maturity(which is your invested capital) along with remaining or accumulated interest is paid.

The main features of Recurring Deposit account are as follows:-

  1. Recurring Deposit schemes aim to inculcate a regular habit of saving among the public.

  2. Minimum amount that can be deposited varies from bank to bank. It can be an amount as small as Rs.10.

  3. The minimum period of deposit starts at six months and the maximum period of deposit is ten years.

  4. The rate of interest is equal to that offered for a Fixed Deposit and is hence higher than any other Savings scheme.

  5. Premature and mid term withdrawals are not allowed. However, the bank may allow to close the account before the maturity period, sometimes with a penalty for premature withdrawal.

  6. RD offers the additional benefit of taking loan against the deposit, i.e., by using the deposit as a collateral. About 80 to 90% of the deposit value can be given as loan to the account holder.

  7. The Recurring Deposit can be funded periodically through Standing Instructions which are the instructions given by the customer to the bank to credit the Recurring Deposit account every month from his/her Savings or Current account.

Duration of Recurring Deposit

Customers can open a Recurring Deposit account with a bank, where the compounding of interest will be done on quarterly basis. The deposit term starts with a minimum period of 6 months, and after that they can choose to increase the tenure in multiples of 3 months up to a maximum period of 10 years. The minimum period for a RD varies from bank to bank. Some banks specify 24 months as minimum duration.

Eligibility for Recurring Deposit

Most Indian banks offer resident Indians and HUF (Hindu Undivided Families), the opportunity to open a RD with them. Some banks even have RD schemes for children and in this scenario minors are also eligible to apply with guardians to supervise their finances.

Compound Interest and Impact of Compounding frequency

Most banks that offer Recurring Deposit usually compound interest on a quarterly basis. Compound interest is interest that is added to the principal amount so that from then on, the interest that has been added also earns interest. This addition of interest to the principal is called compounding.

The following formula gives you the total amount one will get if compounding is done:

Maturity Value of the Recurring Deposits - based on Quarterly Compounding)

M = R [(1+i) n – 1]

--------------------

1- (1+i) -1/3

Where,

M = Maturity value

R = Monthly installment

n = Number of quarters

i = Rate of interest/400

Renewals and Withdrawals of Recurring Deposits

During premature closure of a Recurring Deposit for reinvestment in a term deposit, interest will be paid to the account holder without reducing interest rate by 1% as penalty. This happens only if the deposit after reinvestment, remains with the bank for a period longer than the remaining period of the original deposit. However, if the account holder withdraws the deposited amount before its maturity, the rate of interest that he/she will receive shall be the one applicable to the period for which the deposit has remained with the bank, with a one per cent penalty for premature withdrawal. If after reinvestment the deposit is withdrawn before the maturity period, the penalty of one per cent will be levied from the date of original contract up to the date of premature withdrawal after reinvestment. If the premature withdrawal is made after the due date of maturity of the deposit, then the penalty is levied from the date of reinvestment to the date of premature withdrawal after reinvestment. Terms and conditions about renewal and withdrawal of Recurring Deposits vary from bank to bank.

Premature withdrawal of Recurring Deposit

If the account holder withdraws the deposited amount before its maturity, the rate of interest that he/she will receive shall be the one applicable to the period for which the deposit has remained with the bank, with a one per cent penalty for premature withdrawal. In RD premature withdrawal is possible however the interest rate offered would be less as compared to the normal base rate which is approximately 8.40% per annum (interest rates vary according to bank stipulations). However some banks would deduct interest rate by 1% to 2% for the period during which the deposit remained in the bank. Usually, the minimum lock-in period for a RD account is 3 months and if a premature withdrawal is made before this period, the account holder would earn zero interest and only the principal amount that was deposited would be refunded to him/her by the bank. In addition to penalty on interest, incentives offered on the RD are also cancelled.

Partial withdrawal of Recurring Deposit

Partial withdrawal of RD is not allowed by banks. While most banks do not allow partial withdrawal, other banks offer an alternative in the form of Loan or Overdraft facility which are made available by pledging the balance in RD account as collateral. Also, premature withdrawal is allowed at 1% penalty, for the period during which the deposit has remained with the Bank. Premature closure is allowed but with some penalty. While no bank allows you to make partial withdrawals, you can do so if you have a Recurring Deposit with a post office for at least a year. In fact, the withdrawn amount is considered a loan, which you can repay as a lump sum.

You can withdraw prematurely, but the interest paid will be lower than the base rate for the deposit tenure or that for the tenure the deposit has been with the bank. Some banks may subject the deposit to a penal interest (1-2 per cent). A Recurring Deposit account has a lock-in period of one month. Premature closure in less than a month will not earn interest. Only the principal amount will be returned.

About Nomination of Recurring Deposits

The Recurring Deposit also comes with a nomination facility. Whether held singly or jointly, there can be only one Nominee for a deposit account. Account holders can change the nominee of the recurring deposit account and also make other changes by making a declaration which is effective in the appropriate form. A minor can be made a nominee of a recurring deposit account with a proper guardian cited to supervise.

Loan against Recurring Deposit

A loan or an overdraft, can be availed against the recurring deposit. An individual can avail a loan of up to 75 to 90% of the deposit amount, depending on the bank’s terms and conditions. This is a fruitful option, especially in case of emergency, as interest keeps getting credited and the loan is available at a lower interest rate, as compared to a personal loan.

Read on to find more about Loan Against RD

Income Tax on Recurring Deposit

Tax Deducted at Source (TDS) is applicable for recurring deposits on the interest earned. The tax is paid according to the tax slab of the account holder. The TDS is effective from June 01, 2015. For instance, if the RD is for Rs 10,000, then 10% is deducted as TDS by the bank. Individuals whose income doesn’t fall under the taxable slab are required to submit Form 15G to avoid TDS being deducted on their recurring deposit accounts.

Read on to know more about Income Tax on RD Rates

Recurring Deposits for NRI/NRE

One of the best investment options for NRIs/NREs is a recurring deposit account. Huge savings can be made using small monthly investments. NRIs can either invest in either NRO or NRE Recurring Deposit accounts.

Read on to find more about NRI/NRE Recurring Deposit

Senior Citizens Recurring Deposit

A recurring deposit account enables an individual to deposit fixed amount every month for a pre-defined period which earns interest similar to Fixed Deposits (FD). RDs can be availed by senior citizens as well. The interest rates for senior citizens deposits are higher than the regular account. For this, the minimum amount and tenure are fixed by the bank. The interest on RD is compounded on quarterly basis. Most banks offer senior citizens an additional interest rate of 0.25% to 0.75%, as compared to regular recurring deposits.

Read on to know more about RD On Senior Citizens

Banks Providing Flexi RD

Flexi Recurring Deposit schemes are a type of Recurring Deposit that allow the depositor to invest a flexible sum of money depending on his convenience. They allow the depositor to choose the core investment amount as well as the flexible installments in multiples of the core installment amount. For example, if the depositor chooses Rs. 500 as the core amount, he can choose to make a deposit of Rs. 500 or its multiples for his next deposit.

This scheme offers depositors a choice on how much to invest depending on their means every month, while maintaining a stable interest rate. The interest rate payable is fixed for the core amount while the interest on the core multiples amount would be calculated based on the duration of the investment.

There are a number of banks that offer flexi Recurring Deposit schemes with varying tenures and conditions.

Read on to know more about Different Bank's Flexi RD

Recurring Deposit FAQs

  1. Is interest earned on recurring deposit taxable?

    Yes, the interest earned recurring deposit is taxable.

  2. Is Tax Deduction at Source (TDS) applicable on the interest earned on Recurring Deposits?

    Yes, TDS of 10% is applicable on the interest earned on Recurring Deposits. The TDS will deducted if the interest earned on the Recurring Deposits is more than Rs.10,000.

  3. What is the minimum tenure for Recurring Deposit?

    The minimum tenure for Recurring Deposit (RD) differs from bank to bank. Most banks offer RD schemes for a minimum tenure of 6 months or 12 months.

  4. How much interest can I earn through a Recurring Deposit account?

    The interest rate for Recurring Deposit differs from bank to bank. The amount of interest that you can earn depends on the amount you have deposited in the RD account, the tenure of the RD and the interest rate offered by your bank for that tenure.

  5. What is the minimum amount required for opening a Recurring Deposit account?

    The minimum amount required for opening a Recurring Deposit account varies for every bank and it can be as low as Rs.10

  6. Who can open a Recurring Deposit (RD) account?

    Anyone can open a Recurring Deposit (RD) account. Some banks allow people to open a joint RD account and people can also open this account in the name of their minor child.

  7. How do banks calculate the maturity amount?

    The maturity amount is calculated by banks on the basis of the instalment, account type and tenure chosen by the depositors.

  8. Do Senior citizens receive extra benefits on their Recurring Deposits?

    Yes, generally banks in India provide an additional interest rate on Recurring Deposits to senior citizens.

  9. Can I withdraw my Recurring Deposit before the term is over?

    Yes, you can withdraw your Recurring Deposit before the term is over. However, banks generally do not permit partial withdrawal.

  10. Can I add nominees in my Recurring Deposit account?

    Yes, you can add nominees in your Recurring Deposit account.

News About Recurring Deposit

  • Exchange old Rs.500 and Rs.1000 for New Currency Notes

    Late evening on November 8th, Prime Minister Narendra Modi announced the demonetizing of the Rs.500 and Rs.1000 notes. This move was made in an effort to remove counterfeit currency notes circulating in the economy and further the war on corruption in the country. It is speculated that a large portion of the counterfeit notes are used to fund terrorist activities against the nation and this step is also, in part, taken as a security measure. Individuals have a 50 day window (November 10th to December 30) to exchange all Rs.500 and Rs.1000 currency notes in their possession with any bank or post office. Individuals will need to produce a government issued identity card in the form of Driver’s Licence, Voter ID, Aadhaar Card, Passport etc. while making the exchange. The old Rs.500 and Rs.1000 currency notes will be replaced by new Rs.500 and Rs.2000 currency notes. The new currency notes will be in circulation after November 11th, when banks will resume business operations.

    8th November 2016

  • Mythri Credit Union Rural Women Banking Case Forwarded to Inspector General, Dept. of Registration

    Reserve Bank ordered Mythri Credit Union Rural Women Banking (Mythri Scheme) to be closed down. It was run by Ernakulam Social Services Society or ESSS, which is a social branch of Varappuzha archdiocese. The closure of the scheme was mainly due to alleged misappropriation of the funds of the investors. Sebi henceforth forwarded the case to inspector general at the department of registration, Thiruvananthapuram, for actions to be taken further.

    6th November 2016

  • Small Savings Schemes Fail to Hold their Ground Following New Rate Dynamics

    A number of small savings schemes are finding it difficult to hold their ground with the new rate dynamics. The ones that lost their 25 basis points interest rates spread edge over G-Sec rates performed very poorly in March and the fact they have no Section 80C tax break have affected them adversely. The group of schemes that fall under this category comprises of time deposits with a validity of one year, two years and three years, Kisan Vikas Patra, recurring deposits along with the Post Office Monthly Income Scheme.

    31st July 2016

  • NJDB Opens New Branch at Kamed Village

    Narmada-Jhabua Gramin Bank (NJGB) opened its 380th branch on Saturday. The branch was opened at Kamed village and this makes it the 59th branch in the Indore-Ujjain area. This branch will help meet the rising banking needs of the customers in the region. The bank provides a number of banking products along with higher interest rates than other banks. Some of the products include savings accounts, current accounts, recurring deposits and fixed deposits. The bank also sanctions loans for the purpose of solar pumps, warehouses, agricultural equipment, sprinkler irrigation systems, milk processing plants, orchards, horticulture, greenhouses, animal husbandry and more. The new branch will also offer lockers, NEFT and RTGS.

    31st July 2016

  • RD returns overtake popular Equity Schemes

    Recurring Deposits have come out shining over the past two years as the returns on popular equity mutual funds have not been on par. Though RDs cannot be compared to equity schemes as the risk factors are different, recurring deposit returns though humble have been better than the returns from these schemes. Equity schemes also need a much longer period than 2 years to be judged more accurately, but the data is still interesting to see how these investments fair. HDFC Equity, the largest equity scheme in India, turned around a cumulative amount of Rs.25,000 through SIP from May 2014 to May 2016, clocking in a loss of close to 1%. Reliance Equity also recorded a loss of close to 1.75%.

    31st July 2016

  • RBI Notifies Interest Rates for Small Savings Schemes

    Reserve Bank of India notified the interest rates for different small savings scheme for the second quarter. The interest rates have been retained as it was for the previous April-June quarter. According to the government’s decision, interest rates for small savings schemes such as Public Provident Fund and Kisan Vikas Patra are notified on a quarterly basis. The interest rate on savings deposit is 4% while it is 7.4% and 8.6% for 5 year recurring deposit and 5 year senior citizens savings scheme respectively.The interest rate on Sukanya Samriddhi Account Scheme is 8.6%.

    26th July 2016

  • KVGB Launches New Flexi RD Scheme

    A new flexi recurring deposit scheme was launched by Karnataka Vikas Grameena Bank (KVGB) in Mangalore on Friday. The scheme helps customers deposit money at their own convenience. There are no penalties associated with late payment or with premature closure. The bank will accept monthly contributions as low as Rs.500 up to Rs.1 lakh. A lump sum will be paid out at the end of the fixed term. The Chairman of KVGB, S. Ravindran spoke on the deposit. He also inaugurated the 83rd onsite ATM of the bank at Adargunchi village in Dharwad.

    8th July 2016

  • Flexi Deposits may help you save more

    Flexi Deposits are offered by banks to allow investors the freedom to deposit any amount as and when they wish. Under regular RD schemes, the deposit amount per month is fixed. Missing this payment will result in penalties. But under the Flexi Deposit Schemes, the investor can deposit any amount at any time. Deposits can be made multiple times in a month.

    Furthermore, some banks do not levy penalties if a month’s payment is missed.The upside to these deposits is the freedom to invest more when you can, and less when you cannot. If you are vigilant in your savings, you could end up saving much more than you intended. The downside to this is that there are more chances that you would misuse it. Flexi deposits also caps the maximum investment amount at Rs. 50,000. The rates of interest offered on these deposits may also vary from regular recurring deposits and fixed deposit schemes.

    17th January 2016

  • Finance Ministry Assures that Senior Citizen Recurring Deposits would not be Adversely Affected by Interest Rate Revisions

    Keeping the interests of senior citizens and other small savers in mind, Finance Ministry of India has announced that it will make sure that any revision in the recurring deposit interest rates won’t adversely affect customers belonging to this category. This is also applicable on the revision of rates for small savings accounts such as post office deposits such as Post Office Savings Account, Post Office Monthly Income Scheme, Post Office Time Deposit Scheme, etc. as well as other deposits such as PPF and Sukanya Samriddhi Account. RBI and finance ministry intends to boost the Indian economy through its repo rate cuts and interest revisions since the GDP has dropped drastically over the years.

    9th October 2015

  • Save for your Dream Holidays with Travel RD accounts

    Travel companies have devised schemes for travel dreamers to save money now and travel later without worrying about changes in air fares and hotel costs. These schemes are offered by companies like Thomas Cook. These schemes are also known as “Savings holiday schemes” and work like a recurring deposit where customers can contribute to their travel plans regularly. Vacations, especially international ones, can turn out to be very expensive and a dream that is out of reach for many. Though people love to travel, they may also feel it is not a priority. These schemes prove to be a solution to people who want to invest in a holiday plan.

    The schemes are currently offered by IndusInd Bank, Kotak Bank, Thomas Cook in association with ICICI Bank, and Kuoni India in association with Kotak Mahindra Bank. The holiday savings accounts is a much better and safer option than borrowing a loan or using a credit card. Customers can choose their travel destination and make payments towards it over a period of 12 months into a recurring deposit account. The 13th instalments will be computed with the interest earned and a top-up which is a bonus discount from the travel company.

    3rd October 2015

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