Recurring Deposit: All You Need to Know

A recurring deposit is a type of term deposit that is highly popular among investors as a reliable savings or low-risk investment plan. Offered by banks and financial institutions, this scheme allows depositors to invest a fixed sum of money on a timely basis. This blog will walk you through what is recurring deposit is and provide valuable insights into how it will help you secure your financial future.

Quick Summary

• A recurring deposit (RD) is a safe savings option where you deposit a fixed amount every month and earn interest.
• Banks and post offices offer RD schemes with flexible tenures starting from 6 months.
• Interest is compounded quarterly and taxable if it exceeds ₹10,000 annually.
• RD accounts can be opened online or offline through banks or post offices with basic KYC documents.
• Premature withdrawal and closure are allowed, but may come with reduced interest.
• RD is ideal for salaried individuals or anyone looking to build disciplined savings with assured returns.

What is a Recurring Deposit?

Recurring Deposit is a savings-cum-investment financial instrument that enables individuals to make monthly deposits while accruing a high-yielding interest income. With the flexibility to choose the tenure and investment amount, RD is a better alternative to fixed deposits. It is suitable for investors who want to deposit small amounts at regular intervals rather than a lump sum.  

How Does a Recurring Deposit Account Work?

A recurring deposit account works on the concept of depositors investing a sum of money for a specific tenure set by them and receiving an accumulated amount of principal and interest income upon maturity.

Moreover, a depositor can also link their RD account with another bank account and authorise banks to activate an automatic payment option where principal instalments are debited monthly for RD investment.

Let's understand how a recurring deposit account works in a better way with the help of an example. Suppose you want to invest ₹500 every month in an RD scheme of a bank that offers 6.5% interest for a time period of 8 years. By the end of 8 years, your principal monthly instalment will accumulate and become ₹48,000, which will further earn you a return of ₹14,985. Hence, you will receive ₹62,985 at the time of maturity of your RD investment by depositing only ₹48,000.

ALSO READ: https://stablemoney.in/blog/sbi-rd-interest-rates

Features of Recurring Deposit

Now that you know what is RD deposit is, let's explore some of the salient features of a recurring deposit that set it apart as a distinctive savings and investment option.

1. Guaranteed Returns

A recurring deposit is a fixed-income security that offers guaranteed and stable returns to all investors/depositors at the time of maturity. Moreover, its interest rates remain fixed throughout the entire tenure of an RD investment, enabling investors to determine in advance how much income will accrue.

2. Deposit Amount

The deposit amount required to open an RD account varies for different banks and financial institutions. Generally, an investor can avail of the benefits of a recurring deposit by investing a minimum amount as low as ₹100. However, a recurring deposit is also suitable for investors who can deposit a sizable amount.

3. Flexible Tenure

Most banks and financial institutions offer flexibility when it comes to selecting the tenure of an RD investment. Although a recurring deposit has a minimum tenure of 6 months, a depositor can choose how long he/she want to continue such an investment.

4. High-yielding Interest

By investing in a recurring deposit, investors can avail of higher interest rates as compared to a regular savings account. The interest earned from this type of recurring deposit is compounded every quarter, which generates a significant return over time.

5. Taxation

The interest earned from a recurring deposit is subject to taxation if the total amount of interest is more than ₹10,000 in a financial year. However, a depositor/investor can avoid such tax deductions by submitting the Form 15G/15H to the bank.

How is the RD Interest Rate Calculated?

The interest rate of a recurring deposit can be calculated using an RD Calculator that is readily available online on a bank’s official website. However, you can also calculate its interest manually using a mathematical formula.

Let's take a look at the formula used to calculate the RD interest rate.

M = P*(1+R/N)^NT

In this formula,

M = Maturity Amount of an RD investment,

P = Principal Amount or the sum of money invested in an RD scheme,

R = Rate of Interest offered by the bank,

T = Tenure

N = Number of Compounding Frequency.

Using the above formula and putting in the values, you can easily calculate the earnings that will accrue from an RD investment.

Advantages of Investing in RD

Take a look at some benefits of RD account that you can avail by investing in an RD scheme.

• An ideal investment option for salaried people, an RD investment inculcates a habit of monthly savings and enables them to deposit a small portion of their salary instead of a lump sum amount.
• Besides tenure, an RD scheme has flexible terms and conditions associated with it, allowing premature withdrawals of deposits at your convenience.
• A recurring deposit involves a simple account opening process and is readily accessible to almost all individuals and entities, making it a popular choice for investment.
• By opening this account, a depositor can also avail of a loan/overdraft against the RD facility, amounting to 90% of the RD investment.
• There is no specific limit on the number of RD accounts a depositor/investor can hold. Hence, you can open

What are the Types of Recurring Deposit Account?

Here is a list of different types of recurring deposit accounts you can avail of in 2026.

Regular RD Account

A Regular RD is a standard type of recurring deposit account offered by banks and financial institutions. Among the various types of RD options available, this type of recurring deposit is commonly used and is the most popular option for investors. It allows all individuals to make monthly deposits for a predetermined tenure of their choice and earn a significant interest income in return.

Senior Citizen Recurring Deposit

Unlike regular RD accounts, a senior citizen recurring deposit account is a special RD account for individuals above 60 years of age. Under this account, senior citizens can avail of additional benefits such as preferential interest rates, joint account opening and nomination facility. It also comes with an interest income that is compounded quarterly in a financial year.

Flexi Recurring Deposit

Another addition to the list of recurring deposit types is the Flexi Recurring Deposit. In this account, the principal amount or monthly instalments can vary, depending upon the suitability and convenience of an investor. It allows all eligible entities to deposit a flexible amount at any time during the month without incurring any penalties. A depositor is also allowed to withdraw their RD investment before maturity from a Flexi account.

Recurring Deposit for Minors

While minors cannot avail of the benefits of a regular RD account, they can apply for a special recurring account. This special account is only applicable to individuals under guardianship who are below 18 years of age. An interesting fact about this recurring deposit is that it generates higher returns compared to a regular RD.

NRE/NRO Recurring Deposit

An NRE/NRO recurring deposit account exclusively caters to the financial requirements of Non-Resident Indians, allowing them to earn high-yielding on their foreign income or savings. However, such accounts usually have a minimum tenure of 1 year while the interest is compounded every quarter in a financial year.

How to Open an RD Account?

There are two ways of opening an RD account, online and offline, allowing you to choose the one that suits your convenience. Let’s find out how. 

Online

Here’s a step-by-step guide you need to follow if you want to open an RD account online.

• Visit your preferred bank's official net banking portal and log in using your credentials. You can also use your bank's mobile app to open a RD account online.
• Find the ‘Open an e-RD Account’ option from the main dashboard and click on it.
• Enter the account number from which your RD instalments will be debited.
• Enter the amount of the instalment you want to make.
• Specify the tenure of your RD account.
• Enter all the required details related to the nominee of your RD account.
• Upload all the required documents.
• Click on the ‘Confirm’ tab after verifying the maturity amount, applicable interest rate and all the terms and conditions associated with the RD account.

Offline

The following is a step-wise process of opening an RD account offline.

• Visit the nearest branch of your bank or financial institution offering an RD account.
• Obtain an RD application form from a bank representative.
• Fill out the form and attach all the required documents.
• Verify all the terms and conditions.
• Deposit the first instalment through cash/cheque.

Once you go through all the above steps, the bank representative will process your application form and issue you a receipt upon successful opening.

Where Can You Open an RD Account?

Before we dive into more details on how to open an RD account, let’s first understand what RD is in bank and post offices. 

Bank

Among the several options available for opening a recurring deposit, banks are generally the most common options among individuals. Most bank RD schemes have a fixed interest rate that remains constant throughout 10 years. Besides a fixed income, depositors can avail the option to transfer the RD investment from one bank to another. 

Post Office

Other than banks, post offices in India also provide a recurring deposit scheme, mainly to Indian residents and minors. A post office RD scheme currently offers 6.5% interest, which is subject to change every quarter in a financial year. The minimum deposit amount required to open a Post Office RD scheme is ₹100, while all further deposits in a month are only accepted in multiples of ₹10. Moreover, it has a fixed tenure of 5 years.

Documents Required to Open an RD Account

Check out the documents you must submit to open a recurring deposit account.

• Recurring deposit account opening application form
• Passport-size photographs of the applicant
• PAN Card or Form 60/61
• Identity proof of the applicant as per the KYC norms (Aadhaar Card, Voter ID card, Driving License, Government ID card, Photo Ration Card, Senior Citizen ID Card)
• Address proof of the applicant as per the KYC norms (Passport, Telephone bill, Electricity bill)
• Bank Statement with Cheque
• Certificate/ID card issued by the Post Office

ALSO READ: https://stablemoney.in/recurring-deposits/central-bank-of-india-recurring-deposit

Eligibility Criteria for Recurring Deposit Account

The following entities are eligible to open a recurring deposit account with a bank or other financial institutions.

1. Indian Residents
2. Minors account under guardianship
3. Senior Citizens
4. Non-Resident Indians
5. Corporate Companies
6. Sole Proprietorship Firms
7. Commercial Organisations
8. Government Organisations/Institutions

How to Close an RD Account?

The process of an RD account closure varies for different banks and financial institutions.

Post Office 

Here’s how one can close their RD account offered by a post office.

• Visit the official e-banking portal of India Post and log in by using your registered User ID and password. Enter the captcha carefully and click on the ‘Login’ tab.
• From the following displayed page, find the ‘General Service’ tab under the dashboard and click on it.
• Choose the ‘Services Requests’ option.
• Select the 'New Requests option'. A few options will be displayed.
• Next, you need to click on the ‘Closure and Pre-closure of RD Accounts’ option.
• Select the 'Post office RD' tab.
• Click on the ‘Go’ tab.
• Enter your RD account number.
• Click on the ‘Submit Online’ tab after choosing a credit account.
• Enter the transaction password and click the Submit tab.

Once you go through all the above steps, you will receive a reference number from the post office. The maturity amount of your RD investment will be further credited to your savings account within 24 hours of making a cancellation request.

Bank

Here is a step-by-step guide on how to close an RD account offered by a bank.

• Visit the official website or download the mobile app of your preferred bank or financial institution.
• Find the ‘RD Account Services’ from the main dashboard and click on it.
• Choose the ‘Close/Partially Withdraw’ option.
• Enter the required details, such as the RD account number.

After processing your RD cancellation request, the bank will send you a confirmation message.

Conclusion

Hopefully, now you have a clear idea about recurring deposits and how they can be used to save or grow your earnings. If you are interested in this type of term deposit plan, make sure to verify the interest rates offered by your preferred financial institution. Moreover, carefully reviewing all the associated terms and conditions before prioritising any plan is in your best interest. With that, you are now just one step away from starting your RD investment.