Recurring Deposit (RD): Interest Rates, Schemes

A Recurring Deposit (RD) is a type of term deposit that offers customers the advantages of flexibility, guaranteed returns, and liquidity. Unlike a Fixed Deposit (FD), investing in an RD allows individuals to invest monthly and earn interest based on the applicable rates. Investing in a recurring deposit in India is offered by banks as well as other financial institutions. While opting to invest with a private limited company may potentially yield higher returns, choosing a bank is generally considered a safer option.

Features & Benefits of Recurring Deposit

In a recurring deposit, you earn interest at a set rate over the chosen period. This interest is added to your original deposit either regularly or at the end of the term. When the recurring deposit matures, you receive your initial investment plus all the interest earned during the entire period.

Key features of a recurring deposit:

  1. Encourages regular savings habits.
  2. Affordable deposit amounts starting from as low as Rs. 100 per month, with maximum limits varying by bank.
  3. Flexible deposit terms ranging from 6 months to 120 months.
  4. Offers higher returns compared to savings accounts.
  5. Allows for loans against the deposited amount with the RD serving as collateral.
  6. Does not permit premature withdrawals.

Benefits of investing in a recurring deposit:

  1. Convenient monthly investment option.
  2. Access to loan or overdraft facilities against the deposit.
  3. Option to nominate a beneficiary to receive the maturity amount in the investor's absence.
  4. Offers high interest rates comparable to Fixed Deposits (FDs), making it an attractive yet secure investment choice for risk-averse investors.

Top 10 Banks Recurring Deposit Interest Rates in India for up to 1 year Tenure

Bank Rate of Interest* Deposit Tenure (for deposits up to Rs. 2 crore)
Regular Individuals Senior Citizens
HDFC Bank 6.45% 6.95% 12 months
Axis Bank 6.60% 7.25% 1 year < 1 year 5 days
Yes Bank 7.25% 7.75% 12 months
State Bank of India 6.40% 6.90% 1 year to less than 2 years
Canara Bank 6.50% 7.00% 1 year
IndusInd Bank 7.25% 7.75% 12 months
DCB Bank 7.00% 7.50% 12 months
ESAF Small Finance Bank 8.25% 8.75% 365 – 545 days
Standard Chartered Bank 6.90% 7.40% 12 months
Ujjivan Small Finance Bank 8.10% 8.60% 1 year to 2 years

*Recurring Deposit Rates are subject to change without any prior information.

Top 10 Banks Recurring Deposit Interest Rates in India for Regular Citizens

Bank Rate of Interest (Regular Individuals)* Deposit Tenure (for deposits up to Rs. 2 years)
HDFC Bank 6.85% 27 months
State Bank of India 6.40% 1 year to less than 2 years
Canara Bank 6.50% 1 year
Axis Bank 7.00% 2 years < 30 months
IndusInd Bank 7.25% 12 months
Yes Bank 7.75% 24 months
DCB Bank 8.00% 36 months
Utkarsh Small Finance Bank 9.00% 456 days to less than 2 years
Ujjivan Small Finance Bank 8.10% 12 months to 24 months
Deutsche Bank 7.75% 60 months

*Recurring Deposit Rates are subject to change without any prior information.

Top 10 Banks Fixed Deposit Interest Rates in India for Senior Citizens

Bank Rate of Interest (Senior Citizens) Deposit Tenure
State Bank of India 6.90% 1 year to less than 2 years
RBL Bank 8.15% 24 months to less than 36 months
IDFC First Bank 7.75% 12 months
Standard Chartered Bank 7.40% 18 months
ICICI Bank 7.50% 18 months
IndusInd Bank 7.75% 12 months
Yes Bank 8.25% 24 months
DCB Bank 8.50% 36 months
Utkarsh Small Finance Bank 9.50% 456 days to less than 2 years
Ujjivan Small Finance Bank 8.60% 12 months to 24 months

*Fixed Deposit Rates are subject to change without any prior information

Note: Fixed Deposit interest rates are applicable on the amount below Rs. 2 Crore.

Best Recurring Deposit Interest Rates

Interest rates on recurring deposits are subject to change over time due to various factors. It's crucial for potential investors to stay informed about the prevailing RD interest rates in the market.

The following tables display varying RD rates for regular citizens and senior citizens.

Why Choose Recurring Deposit?

Many people view term deposits as a safe and profitable investment choice. Fixed deposits, a type of term deposit, involve a single investment, while recurring deposits are ideal for those with regular income who want to invest regularly.

Take note of the following points to grasp the significance of investing in a recurring deposit:

  • Short deposit tenure starting from mere 6 months

Investing in a recurring deposit allows for shorter lock-in periods, enhancing liquidity. This is beneficial for individuals aiming to efficiently meet their short-term goals.

  • Guaranteed returns

Recurring deposit stands out as one of the safest investment options available. With no ties to the market, economic fluctuations won't impact investors' returns. They earn profits based on the fixed rate agreed upon at the outset, ensuring stability regardless of market conditions.

  • Flexibility to invest on a monthly basis

Unlike Fixed Deposits (FDs), investors have the flexibility to make regular deposit payments with a Recurring Deposit (RD). This feature is ideal for individuals who may not have a large sum of money upfront but can consistently save smaller amounts over time..

  • Higher rate of interest than savings account

Given that Recurring Deposit (RD) interest rates align with those offered in Fixed Deposits (FDs), investing in an RD typically yields higher returns compared to other bank deposit schemes such as savings accounts.

Documents Required for Opening an RD Account

To open an RD account, customers need to prepare the following documents:

  1. 1.Photo ID proof (such as Aadhaar card, PAN card, Passport, etc.)
  2. 2.Address proof (like any recent utility bill, Aadhaar card, Ration card, etc.)
  3. 3.PAN card
  4. 4.Duly filled and signed application form
  5. 5.Passport size photographs

Note: This list may not cover all necessary documents, so it's advisable to check with the respective bank or financial institution for any additional requirements.

How to Open a Recurring Deposit?

Individuals have the option to open a recurring deposit account both online and offline. For online applications, account holders can visit the official bank website or log in to the net banking portal or mobile banking app to apply for a recurring deposit.

For offline applications, individuals can visit the nearest bank branch or contact customer care for assistance and further inquiries.

Taxation of Recurring Deposit

Similar to a fixed deposit scheme, the interest income earned on a recurring deposit is considered part of the investor's annual income. This income is categorized under the 'Income from Other Sources' and is fully taxable according to the applicable income tax slab.

If the interest income from bank or post office deposits totals Rs. 40,000 or less, no tax is levied. However, if it exceeds this limit, banks impose a 10% TDS (Tax Deducted at Source).

Individuals falling under the 5% income tax slab can file an Income Tax Return to claim a refund. Those not liable to pay any income tax should submit Form 15G to their respective banks to avoid TDS deduction. Senior citizens should submit Form 15H for the same purpose.

Note that these forms must be submitted annually for each recurring deposit owned by the individual.

Fixed Deposit vs. Recurring Deposit

Fixed deposits and recurring deposits are both considered safe investment options offered by banks, with the same interest rates applicable to both types of term deposits.

However, despite their similarities, there are key differences between fixed deposit and recurring deposit. Here are some important distinctions:

Fixed Deposit Recurring Deposit
Deposit term ranges from 7 days to 10 years. Deposit term ranges from 6 months to 10 years.
Entire deposit amount is paid at once. Deposit amount is paid in monthly installments.
No maximum limit on deposit amount (limits may vary between banks). Maximum deposit amount capped at Rs. 15 lakh (amount may vary depending on the bank).
Interest is calculated on the entire amount, potentially resulting in slightly higher returns compared to RDs. Interest is calculated on monthly installments, potentially resulting in lower returns compared to fixed deposits.

Frequently Asked Questions (FAQs)

1. Which is better, FD or RD?

When it comes to returns, investing in a fixed deposit usually offers higher returns compared to recurring deposits. However, if flexibility in making deposits is a priority, recurring deposits have an advantage. With fixed deposits, the entire payment must be made at once, whereas with recurring deposits, investments can be made on a monthly basis.

2. Can one withdraw RD before maturity?

No, if allowed by the bank, premature withdrawal of a recurring deposit may incur a penalty. However, some banks may offer the option for partial withdrawals.

3. What is the minimum tenure for recurring deposits?

The minimum tenure varies from bank to bank but is typically around 6 months.

4. Can an NRI open Recurring Deposit account in India?

Yes, Non-Resident Indians (NRIs) can open a Recurring Deposit (RD) with banks in India.

5. Are there any benefits for senior citizens?

Yes, most banks offer a preferential interest rate on recurring deposits for senior citizens. Typically, this rate is 0.50% higher than the standard rate offered to the general public.

6. Can an investor mention nominees for his/her recurring deposit account?

Yes, banks provide a nomination facility for recurring deposit accounts.

7. What will be the maturity amount of an RD?

The amount received at maturity includes the deposited sum along with the accrued interest. If the recurring deposit offers additional incentives, those will also be added to the maturity amount.

8. Is the interest earned on RD taxable?

Yes, the interest earned on a recurring deposit is taxable according to the individual's applicable income tax slab.

9. Can one open an RD with the bank where he/she doesn’t have a savings account?

It varies depending on the bank. Some banks allow non-customers to open recurring deposit accounts, while others may offer the facility exclusively to existing customers.