Recurring Deposit is one of the most popular investment options that belong to the low-risk category. It is quite flexible and customer-friendly, offering multiple choices for the amount of investment, the term of investment, and a host of other benefits. The tenure ranges between 6 months and 10 years, and this scheme is offered by all banks and NBFCs. RD is ideal for corpus building and monthly savings. In this article, we will highlight the major benefits of the Recurring Deposit scheme.

Salient features of the Recurring Deposit scheme

  • The rate of interest ranges between 5% and 8%, which varies from bank to bank.
  • The minimum deposit amount can be as low as INR 100.
  • The tenure of investment ranges between months and 10 years.
  • The interest is usually calculated quarterly.
  • No partial or mid-term withdrawal is allowed.
  • Premature closure of the account is permitted with a penalty.

Top 6 benefits of RD investment

  • Ideal for achieving financial goals

Recurring Deposit is a purely secured, risk-free investment tool with assured returns, which can help fulfill both long-term and short-term goals. You can invest in RD to achieve targets like:

  • Children’s education
  • House maintenance, renovation, and furnishing
  • Foreign trips
  • Fulfilling marriage expenses
  • Certain pre-planned medical procedures

On maturity, the principal is returned with interest accumulated throughout the tenure. 

  • Immune from interest changes

The rate of interest is decided by the concerned financial organization, following government rules and regulations. This rate remains fixed throughout the tenure, irrespective of the changes encountered and implemented in between the course. Depending on the circumstances, the rate of interest is decided, and you know it during the time of investment. It offers secured protection against rate swings of interest. This rate remains constant, and the interest is generally calculated quarterly. Unlike mutual fund or stock market investments, RD investment remains undisturbed and unaltered by market conditions. 

The interest is calculated based on a formula:

M = R[(1+n]/1-(1+i)-1/3, where, M=maturity amount; R=monthly instalment amount; n=total number of quarters, and i=the rate of interest/400.

RD helps in the growth of your deposit as the interest earned gets accumulated and enhanced throughout the tenure of the investment. Therefore, the longer the tenure continues, the more interest you earn. You can know the prospects of your planned investment even before you invest with the aid of the online Recurring Deposit calculator

  • Inculcates disciplined approach

Since recurring deposit investment requires a fixed amount every month, it helps you practice a disciplined financial approach. You never require any lump sum amount for investment, but a small but steady investment is essential. This helps cut unnecessary expenses and build a corpus for a stable and secure future. It is perfectly suitable for salaried individuals who must invest only a portion of their monthly income, the predetermined amount. 

  • No Penalties

One of the biggest advantages of recurring deposit investment is that no penalty is charged even if you miss your investment in one particular month. However, depending on the policies and practices of the concerned financial institution, premature withdrawal is liable to a penalty.

  • Comparatively higher rate of interest

When compared to a savings account, RD offers a comparatively higher interest rate. Moreover, for senior citizens, this rate is even higher, ensuring better returns. 

  • Loan facility against Recurring Deposit

You can borrow loans against your existing recurring deposit during financial contingencies. The banks offer a comparatively lower rate of interest on loans borrowed against RD. 

Setting up an RD:

You can open an RD account both offline or online. 

Online procedure:

For the online opening, you follow these steps:

  1. Firstly visit the official website of the concerned financial organization
  2. Choose the e-RD account opening option
  3. Enter the relevant details, including the bank account from which the funds will be automatically debited, the monthly investment amount, the tenure of investment, and the nominee’s name
  4. Agree to all the terms and conditions
  5. Apply and receive the receipt over your registered email address

Offline procedure:

For offline process:

  1. Visit the nearest branch of the bank of your choice.
  2. Fill in the RD opening form, mentioning all the relevant details correctly, including your bank details, nominee name, mode of payment, amount of investment, tenure, etc.
  3. The initial payment must be paid either in cash or by cheque.
  4. Your request will be processed shortly by the banking authorities.

Even if you follow the offline process for opening the RD account, you can still check out the prospects of your planned investment using the online Recurring Deposit calculator. A Recurring Deposit calculator works automatically, revealing the maturity amount as you enter your investment and tenure based on the current interest rate. 


The above discussion reveals some of the major benefits of RD investment and other details. Any Indian savings account holder, above 10 years of age can open this account. A minor of or below 10 years can maintain this account under legal guardianship. A government or corporate organization too can open it. 

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