Tip: change start date to shift months shown in the schedule.
Amortization schedule
| # | Month (calendar) | Deposit (₹) | Top-up (₹) | Interest this month (₹) | Balance (₹) |
|---|
Most people don’t fail because they don’t earn enough — they fail because they can’t save regularly. A Recurring Deposit, or RD, is a quiet answer to that problem. It doesn’t promise quick riches or market thrills; it promises something more powerful — discipline.
Think of it as that strict schoolteacher who made you attend every class, even on rainy days. You may have disliked it then, but years later, you thank them for the habits they built. A Recurring Deposit does the same with your finances — it rewards consistency, not luck.
A Recurring Deposit (RD) is a simple saving scheme offered by banks and post offices. You deposit a fixed amount every month for a chosen period — say ₹2,000 for five years — and earn interest on it, compounded quarterly. When it matures, you receive your total savings plus the interest earned. It’s predictable, safe, and quietly effective.
How a Recurring Deposit Works
Suppose you invest ₹2,000 every month for 5 years at an interest rate of 7%.
By the end of the term, you will have deposited ₹1,20,000 — but the magic of compounding will add about ₹22,000 in interest.
At maturity, your balance will be roughly ₹1,42,000 — earned steadily, one disciplined month at a time.
That’s the beauty of RD: it grows quietly in the background while you focus on living your life.
Benefits of a Recurring Deposit
- Low Risk, High Reliability
Market ups and downs don’t affect your RD. Your returns are fixed and guaranteed, which makes it one of the safest saving options. - Encourages Saving Discipline
With auto-debit features, your chosen amount is deducted every month — no excuses, no delays. It’s like setting a quiet reminder to pay yourself first. - Flexible Tenure Options
You can choose from 6 months to 10 years depending on your goal — be it a vacation, festival savings, or a down payment. - Power of Compounding
Interest is compounded quarterly, meaning you earn interest on your previous interest too. It’s the snowball effect — slow, steady, and certain. - Loan Facility
Most banks allow you to take a loan against your RD (up to 80–90% of its value). You can borrow without breaking your savings.
Who Should Consider a Recurring Deposit
- Salaried individuals who want to save regularly.
- Students or young professionals starting their financial journey.
- Parents saving for short- to medium-term goals.
- Retirees looking for a safe, stable monthly investment.
- Anyone who struggles to save consistently but wants a structured plan.
Tips and Tricks to Maximise RD Benefits
- Link RDs to Goals
Open separate RDs for each goal — a holiday fund, a gadget fund, or a festival fund. Savings feel more meaningful when each has a purpose. - Stagger Your RDs
Instead of one big RD, open multiple smaller ones with different maturity dates. It creates a financial ladder — giving you liquidity and reinvestment opportunities. - Reinvest the Maturity Amount
When one RD matures, start another immediately or transfer it to a higher-yield option like an FD or SIP. That’s how compounding turns small savings into wealth. - Avoid Premature Withdrawals
Breaking an RD early leads to penalties and lower interest. Think of it as your commitment contract with yourself — keep it till the end. - Compare Bank Rates
Different banks offer different RD interest rates — sometimes varying by as much as 0.5–1%. A quick comparison before starting can make a big difference in long-term gains.
Recurring Deposit vs Other Schemes
| Feature | Recurring Deposit (RD) | Fixed Deposit (FD) | Mutual Fund SIP | Public Provident Fund (PPF) |
|---|---|---|---|---|
| Risk | Very Low | Very Low | Moderate–High | Very Low |
| Returns | 6–8% (fixed) | 6–8% (fixed) | 10–15% (market-linked) | 7–8% (government-backed) |
| Volatility | None | None | High | None |
| Liquidity | Medium | Medium | High | Low (15-year lock-in) |
| Investment Type | Monthly | One-time | Monthly | Yearly/Monthly |
| Taxation | Interest taxable | Interest taxable | Depends on fund | Tax-free |
| Best For | Habitual savers | Lump-sum investors | Growth seekers | Long-term planners |
If Fixed Deposits suit people who have a lump sum to invest and SIPs attract those chasing market returns, Recurring Deposits sit comfortably in between — perfect for steady savers who prefer safety over volatility.
Yogi’s Take
A Recurring Deposit doesn’t shout. It doesn’t flash numbers or chase trends. It’s the quiet student in the class — regular, unnoticed, but always reliable. Over time, it wins.
Every deposit you make is not just money — it’s a message to your future self: I care enough to plan. The amount may be small, but the habit is monumental.
It’s not about getting rich overnight; it’s about training your mind to save consistently. Because wealth, in truth, is built on rhythm — not luck.
A Recurring Deposit may not make you a millionaire in a year, but it can make you something rarer — financially peaceful.
Frequently Asked Questions
1. Is a Recurring Deposit a good investment in 2025?
Yes. With interest rates stabilising around 6–8%, RDs remain an excellent option for low-risk, short- to medium-term savings.
2. Can I withdraw my RD before maturity?
Yes, but premature withdrawal attracts penalties and reduced interest. It’s better to plan tenure according to your actual need.
3. How is interest on an RD calculated?
Interest is compounded quarterly. Most banks use the formula:
M = R × [(1 + i/n)ⁿᵗ – 1] / (1 – (1 + i/n)⁻¹/ⁿ)
Where:
- M = Maturity amount
- R = Monthly installment
- i = Annual interest rate
- n = Number of quarters in a year (4)
- t = Tenure in years
4. Which banks offer the best RD rates?
Rates vary, but as of now, small finance banks and post offices often offer slightly higher returns (around 7.5–8%) than major nationalised banks.
5. Is RD interest taxable?
Yes, the interest earned is taxable as per your income slab. However, if your total income is below the taxable limit, you can submit Form 15G/15H to avoid TDS.
