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Recurring Deposit (RD) – A Perfect Investment for Beginners

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recurring depositRecurring Deposit, also known popularly as RD is one of the simplest financial products available in the market. For a beginner in the financial industry, there cannot be anything simpler than this. Even for those who do not understand financial products too well, RD can be a very good choice.

Recurring deposit can be defined as a steady, gradual form of building wealth for an individual. You would be depositing a fixed sum of money every month for a defined period. The fact that you can even deposit small amounts makes this scheme very attractive. However, the scheme could not get as popular as a term or fixed deposit.

How does it Work?

All banks offer investment in RD. You need to first choose a bank where you would like to open an RD account. Bank would then ask you for the monthly amount and tenure you would like to invest for. The monthly amount to be deducted can be done through ECS (Electronic Clearance System). ECS is a process where the amount required will be automatically deducted from your savings bank account on a monthly basis.

Interest will be credited to the RD account on a quarterly basis. You can withdraw the lump sum amount i.e principal amount + interest amount on maturity. Minimum investment tenure could be 6 months and maximum could be 10 years depending on the bank. Maturity amount can remain in the account; it would continue to earn interest for up to 5 years without contributions. You can also open RD account as part of a Post Office scheme.

Advantages of RD Account

  • Minimum amount to invest is as low as Rs. 10 per month.
  • Higher interest rate than savings bank account.
  • No TDS on interest
  • Higher interest on account of quarterly compounding
  • Low risk instrument
  • Loan facility up to 75% of outstanding amount.

Disadvantages of RD Account

  • Interest amount is not tax free.
  • Cannot withdraw the money on emergencies.
  • Cannot change the amount of investment every month.

Rates of Interest on RD

Recurring deposit or RD offers attractive interest rates, higher than saving bank rates. However, the rates are not fixed and vary from bank to bank. Following are the rates offered on 1 year RD by different banks:

Name of the



Rate (%) p.a

Karur Vysya Bank9.50
Allahabad Bank9.15
Andhra Bank9.10
Bank of Baroda9.05
Bank of India9.00
Axis Bank9.00
HDFC Bank8.75
ICICI Bank8.00

Note: Interest rates are subject to change from time to time.


You should be considering investment in RD as part of your portfolio. It gives you safety along with an attractive interest rate. Also check out for banks which offer a top up of the invested amount up to a certain limit, instead of investing the same amount till maturity.

  • Urna Kundu

    can you please explain me the difference between- no TDS on interest and interest amount is not tax free

  • Rohini Hiremath

    While investing in a Recurring Deposit scheme, you can use an RD calculator for calculating the maturity amount that you will get on your deposits. RD calculator gives you a brief idea about your investments under this scheme.
    To calculate, you can refer here- https://goo.gl/p4ILY0

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