What is an RD? (Recurring Deposit)
A Recurring Deposit is a savings scheme offered by banks where you deposit a fixed amount every month for a predetermined tenure and earn interest on it. RDs combine the benefits of regular savings with the assured returns of a fixed deposit.
For example, depositing ₹5,000 per month at 6% per annum for 2 years yields a maturity value of approximately ₹1,27,500.
RD Maturity Formula
M = P × n × (1 + r × (n+1) / (2×12))
Where:
M = Maturity Amount
P = Monthly Deposit Amount
n = Tenure in Months
r = Annual Interest Rate (÷ 100)
Key Features of Recurring Deposits
- Regular Savings Habit: Encourages disciplined monthly saving.
- Guaranteed Returns: Interest rate is fixed at the time of opening.
- Flexible Tenures: Usually 6 months to 10 years.
- Loan Against RD: Banks allow loans up to 80–90% of the RD value.
Who Should Invest in RDs?
- Salaried individuals looking for a safe, no-risk savings option.
- People saving for a specific short-term goal (vacation, purchase, emergency fund).
- Those who find lump-sum investments difficult and prefer monthly commitments.
