Recurring Deposit, often known as an RD, is a term deposit that allows consumers to invest an amount of their choice each month and save money easily. The interest rate banks give on RDs is influenced by things, including your category and the duration you select. Most banks offer senior citizens a higher interest rate than other residents.
Banks offer you multiple options within the RD category. The interest rates on recurring deposits that banks give to the general public range from 2.50% to 8.50% p.a. Banks provide senior citizens with a higher interest rate when they create an RD account. The minimum deposit term for RD accounts is six months, and the maximum deposit tenure is ten years.
Major Bank’s best RD rates 2022 (As On 30th October 2022)
| Bank | RD Interest Rates (Regular Citizen) | RD Interest Rates (Senior Citizen) |
| HDFC RD Interest Rates | 4.50% to 6.20% | 5.00% to 6.95% |
| ICICI RD Interest Rates | 4.25% to 6.10% | 4.75% to 6.75% |
| SBI RD Interest Rates | 5.50% to 6.10% | 6.00% to 6.90% |
| Axis Bank RD Interest Rates | 5.00% to 6.10% | 5.25% to 6.85% |
| Bandhan Bank RD Interest Rates | 4.50% to 5.60% | 5.25% to 6.35% |
| Bank of Baroda RD Interest Rates | 4.00% to 5.65% | 4.50% to 6.65% |
| Bank of India RD Interest Rates | 3.85% to 5.75% | 4.35% to 6.50% |
| Canara Bank RD Interest Rates | 4.50% to 6.50% | 4.50% to 7.00% |
| Citibank RD Interest Rates | 2.75% to 6.75% | 3.25% to 7.25% |
| City Union Bank RD Interest Rates | 5.75% to 6.90% | 6.00% to 7.25% |
| DBS Bank RD Interest Rates | 3.00% to 6.25% | 3.50% to 6.75% |
| Federal Bank RD Interest Rates | 4.80% to 6.00% | 5.30% to 6.65% |
| IDBI Bank RD Interest Rates | 4.80% to 6.10% | 5.30% to 6.85% |
| Indian Bank RD Interest Rates | 3.85% to 5.65% | 3.85% to 6.30% |
| Indian Overseas Bank RD Interest Rates | 4.10% to 5.85% | 4.60% to 6.35% |
| IndusInd Bank RD Interest Rates | 6.25% to 7.00% | 7.00% to 7.75% |
| Jammu and Kashmir Bank RD Interest Rates | 4.50% to 6.25% | 5.00% to 6.75% |
| Karnataka Bank RD Interest Rates | 5.25% to 5.80% | 5.65% to 6.30% |
| Karur Vysya Bank RD Interest Rates | 5.50% to 6.10% | 6.60% to 6.70% |
| Kotak Mahindra Bank RD Interest Rates | 5.00% to 6.10% | 5.50% to 6.60% |
| Post Office RD Rate | 5.80% | 5.80% |
| Punjab National Bank RD Interest Rates | 4.50% to 6.10% | 5.00% to 6.65% |
Features Of Recurring Deposit Account
- You can typically open an RD account with a minimum monthly investment of Rs.10.
- Banks typically compound interest once per quarter.
- RD accounts generally pay a greater interest rate than savings accounts.
- RD accounts’ lock-in period may range from 30 days to 3 months, depending on the bank.
- Withdrawal within the lock-in period will typically result in a loss of interest.
- A single individual may have an unlimited number of RD accounts.
- The minimum deposit term for RD accounts is typically six months, and the maximum deposit tenure is ten years.
- Premature withdrawals are permitted with a penalty.
- Seniors may be eligible for an extra 0.5% interest rate.
- Minors can open RD accounts in their names, but only with the permission of their parents/guardians.
- Individuals can set up standing orders, so the payments are debited automatically from your savings account without needing personal intervention.
- Against the security of RD balance, overdraft or loan can be availed by the account holder.
- You can invest in instalments rather than a lump sum, in contrast with fixed deposits.
How To Calculate Interest Rates For Recurring Deposit Schemes?
The interest under the recurring deposit scheme is determined by considering several variables, including invested money, tenure, and the kind of plan chosen. You can select the interest earned on your investment using the method below.
In most banks, RD interest is compounded quarterly. The formula is as follows:
M = R[(1+i)^n-1]/(1-(1+i)^(-1/3) )
In this case,
-
- M stands for Maturity Value,
- R is the Monthly Payment,
- n is the number of quarters,
- I is the Interest Rate/400.
For example, If you deposit Rs. 10,000 each month into an RD for a year at an interest rate of 7%, the total value of your investment will be:
R = 10000, n = 4 (one year has four quarters), I = 7/400 then M= 124620.
Premature Withdrawal Of RD
- If the account holder withdraws the money from the deposit before it matures, the interest rate received will be the one that was in effect when the bank held the deposit. The bank will also impose a 1-2% penalty for early withdrawal of recurring deposits.
- According to bank policies, different interest rates are offered by banks. However, some banks would lower the interest rate by 1% to 2% retrospectively for the time the deposit was kept in the bank in the event of an early withdrawal.
- The minimum lock-in time for an RD account is typically three months. Before this time, if an early withdrawal is made, the account holder will not receive any interest payments; instead, the bank would simply return the principal that was deposited.
Partial Withdrawal Of Recurring Deposit
- While most banks do not allow partial withdrawals, some do through a loan or overdraft facility, which is made possible by using the remaining balance in the RD account as collateral.
- The cash withdrawn is thought of as a loan that you can pay back through bullet repayment.
- You can withdraw early, but the interest you get will be less than the base rate for the duration of the deposit or for the period during which the deposit has been held by the bank. Some banks could charge penalty interest on the deposit (1-2 per cent).
Tax Exemptions On RD
Under Section 80C of the Income Tax, 1961, investments in bank RD are not exempted from taxation. As a result, investing in any of the bank’s recurring deposits is not tax exempted and the applicable tax rate is determined by the individual investor’s tax slab rates.
The interest you earn on your recurring deposit is subject to a 10% TDS (Tax Deducted at Source). TDS is not deducted if the interest on your recurring deposit is less than Rs.10,000. If you fail to provide the bank with your PAN, the TDS will be 20%.
Types Of RD Interest Rates
- Regular RD Accounts: Regular RD accounts are only available to Indian citizens 18 years or older. The account enables account holders to deposit a certain amount into the account once each month for a predetermined period to receive a set interest rate on the deposit amount. Depending on the account’s length, the compound or simple interest approach will be utilised to calculate interest.
- RD Accounts for Minors: These accounts will be created in the names of those under 18, but only under the supervision of their parents or legal guardians. Similar to ordinary RD accounts, the account will be opened with a specified monthly payment and duration. The returns might be somewhat greater or equivalent to the ordinary RD accounts.
- RD Accounts for Senior citizens: Banks provide special RD accounts for senior citizens. Senior citizens can receive higher rates on RD than other consumers. Each quarter, the interest is compounded.
- Non-Resident Indians (NRIs): can open NRE and NRO RD accounts, which stand for Non-Resident External and Non-Resident Ordinary, respectively. Through these accounts, NRIs may save money each month on income from inside and outside India while also earning a respectable interest rate.
Special RD Schemes:
Banks also provide several schemes geared to satisfy the needs of different clients. These schemes often have higher interest rates since the consumers’ objectives are clear. Other banks offer additional schemes that provide excellent returns, increasing the lump sum payment and making the investment profitable.
Different Types Of RD products
- ICICI
| Product Name | Minimum Deposit Amount | Duration |
| Regular Recurring Deposit | Rs 500 | 6 months to 10 years |
| Iwish Flexible RD | Rs. 50 | 6 months to 5 years |
- Central Bank of India
| Product Name | Minimum Deposit Amount | Duration |
| Cent Swa Shakti Flexi | ₹ 100 | 6 months to 10 years |
| Cent Lakhpati | ₹ 100 | 6 months to 10 years |
| Cent Millionaire | ₹ 100 | 6 months to 10 years |
- SBI
| Product Name | Minimum Deposit Amount | Duration |
| Recurring Deposit scheme | ₹ 100 | 1 year to 10 years |
- Bank of Baroda
| Product Name | Minimum Deposit Amount | Duration |
| Baroda Recurring Deposit Scheme | Rs. 50 | 6 months to 10 years |
| Flexible Recurring Deposit Scheme | Rs. 100 | 1 year to 10 years |
FAQs
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What Happens If The Interest Rate Changes While I Have An RD Account Open?
When you start an RD account, the interest rate is fixed and will not change even if interest rates move over the term of the account. Any changes will only be effective if you establish a new RD account. When there is a rate change, the rate applicable to a reserve will not be changed.
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Can I Make Monthly Deposits Into My RD Account In Various Amounts?
No. A standard RD account will not allow you to deposit varying monthly amounts. Some banks, however, provide flexible RD plans, which you can deposit many times each month and in various quantities, depending on your savings.
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Is The Post Office RD The Same As Any Other Bank Offered RD?
Though the fundamental operation of Post Office RD and bank RD accounts is the same, there may be variances in specific laws and regulations.
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Is A Loan/Overdraft Facility Available With All RD Accounts?
Not all RD accounts provided by all banks offer the loan/overdraft feature. Even if they do, some requirements, such as account tenure, tenure finished, monthly instalment amount, and others must be met. Furthermore, the overdraft or loan amount may range from 50% to 90% at the bank’s discretion.
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What Happens If I Don’t Make My RD Payments On Time?
The bank may shut your RD account if you fail to make your RD instalments on schedule. The lender’s premature withdrawal policy will determine the appropriate interest rate.
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Is The Post Office RD The Same As Any Other RD Given By A Bank?
Although the fundamental operation of RD accounts supplied by banks and the Post Office is identical, there may be some differences in some norms and laws.
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Is Tax Deduction At Source (TDS) Applicable To Recurring Deposit Interest?
Yes, a 10% TDS is levied on the interest generated on recurring deposits. TDS will be deducted if the interest generated on the recurring deposits exceeds Rs.10,000.
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Is The Interest Rate On An RD Compounded Quarterly?
Yes, quarterly compounding is used for RD interest rates.
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Is It Possible To Pay More Than One Instalment At A Time?
Yes, additional payments can be made one at a time. However, you should know that no interest will be generated on the additional instalment.
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Do Senior Citizens Receive Higher Interest Rates On RD Accounts?
Yes, most banks give senior citizens higher interest rates on RD accounts.
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