What is RD (Recurring Deposit)? — Meaning, Definition & Example
Definition
A Recurring Deposit is a savings scheme where you deposit a fixed amount every month for a predetermined period, earning interest similar to FD rates. It is ideal for disciplined monthly savings. Available at all banks and post offices.
Depositing ₹5,000/month in an RD at 6.5% for 3 years would give you approximately ₹2.01 lakh at maturity.
🇮🇳 RD (Recurring Deposit) in Hindi / हिंदी में
RD (रिकरिंग डिपॉजिट) — RD एक बचत योजना है जिसमें आप एक निश्चित अवधि के लिए हर महीने एक निश्चित राशि जमा करते हैं। ब्याज दर FD जैसी होती है।
RD (Recurring Deposit) (Hinglish) — RD ek savings scheme hai jisme aap har mahine ek fixed amount deposit karte ho ek fixed period ke liye. Interest rate FD jaisi hoti hai.
How an RD Actually Works
You commit a fixed amount every month (as low as ₹100 at the post office) for a chosen tenure — banks offer 6 months to 10 years, the post office RD runs 5 years. The rate is locked on day one for the entire tenure, and interest compounds quarterly. Miss a month and banks charge a small default fee (post office: ₹1 per ₹100 per month missed).
RD Interest Rates — July 2026 (Verified)
| Where | Rate | Notes |
|---|---|---|
| Post Office RD (5 yr) | 6.7% | Govt-notified for Jul-Sep 2026 quarter (unchanged); sovereign guarantee |
| Major banks (SBI/HDFC/ICICI class) | ~6.25-7.0% | Tenure-wise; usually mirrors their FD card |
| Small finance banks | up to ~8% | Higher rate, but keep within DICGC ₹5 lakh cover per bank |
| Senior citizens | +0.25-0.50% | Over card rates at most banks |
Bank RD rates track FD rates — check the live peaks on our verified FD rates page before booking.
What ₹5,000/Month Actually Becomes
| Tenure | You Deposit | Maturity (at 6.7%) | Interest Earned |
|---|---|---|---|
| 3 years | ₹1,80,000 | ~₹1.99 lakh | ~₹19,000 |
| 5 years | ₹3,00,000 | ~₹3.55 lakh | ~₹55,000 |
Figures use the post-office quarterly-compounding method and are rounded — your bank's RD calculator will differ slightly by rate and compounding dates.
RD vs FD vs SIP — Which One For You?
| RD | FD | Equity SIP | |
|---|---|---|---|
| How you invest | Fixed monthly | One lumpsum | Monthly (flexible) |
| Returns | ~6.25-7% fixed | ~6.45-6.85% fixed (majors) | Market-linked (historical long-run 10-14%, NOT guaranteed) |
| Risk | None (DICGC/sovereign) | None (DICGC/sovereign) | Full market risk |
| Best for | Short goals 1-3 yrs, forced discipline | Parking a lumpsum | Goals 5+ years away |
Simple rule: money you will need within ~3 years → RD/FD. Money for 5+ year goals → SIP earns more but swings. Try both in our SIP calculator and planning tools.
Tax on RD — What Nobody Tells You
RD interest is fully taxable at your slab rate — there is no 80C benefit on any RD (only the 5-year post-office Time Deposit gets 80C, not the RD). Banks deduct 10% TDS once your total interest across FDs+RDs at that bank crosses ₹50,000/year (₹1 lakh for senior citizens) — thresholds raised in Budget 2025. If your income is below the taxable limit, file Form 15G (15H if 60+) to stop TDS.
Three RD Mistakes to Avoid
1. Breaking it casually — premature closure recalculates interest at the lower applicable rate, often with a penalty; post-office RD can only be closed after 3 years at savings-account rate. 2. Using RD for 10-year goals — at ~6.7% pre-tax you barely beat inflation; long goals belong in equity. 3. Ignoring the tax drag — at the 30% slab, a 6.7% RD is ~4.7% post-tax.
Rates verified against the Finance Ministry Jul-Sep 2026 notification and July-2026 bank rate cards. Facts last checked: 11 July 2026 by Priyanka Dhawan.