RD Calculator (Recurring Deposit)

A recurring deposit (RD) is like an FD you fund monthly. You commit to depositing a fixed amount every month for a set tenure (typically 6 months to 10 years), and the bank pays interest on the accumulating balance — usually compounded quarterly — just like an FD. For disciplined savers it converts a modest monthly habit into a meaningful lump sum at a guaranteed rate.

How it's calculated

Unlike an FD where a single lump sum compounds, an RD has a new deposit each month. The standard approach compounds the running balance quarterly and credits each month's deposit as it is made:

• Every month, your deposit is added to the balance.
• At the end of each quarter, the balance earns interest at the quarterly rate.
• At maturity you receive the sum of all deposits plus all the interest.

Because compounding only happens at quarter-ends, the first deposit of a quarter earns no intra-quarter interest — a small timing nuance that costs a few days of interest per deposit and explains why the maturity value is slightly below the neat "annual 6.5%" formula you might expect.

Worked example

Deposit ₹5,000 every month at 6.5% for 5 years (60 months):

• Total deposited = 5,000 × 60 = ₹3,00,000
• With quarterly compounding, the maturity value is approximately ₹3,56,863
• Total interest earned ≈ ₹56,863

Switch to half-yearly compounding and the same plan matures at about ₹3,59,209 — the extra ~₹2,300 is the effect of compounding less frequently (fewer interest-credit events), a reminder that quoted "rate per annum" is only half the story; the compounding schedule is the other half.

A closer look at the returns

The ₹56,863 of interest on ₹3,00,000 of deposits is much more than 6.5% of the principal, because early deposits earn interest for nearly the whole 5-year tenure while only the final few months' deposits earn almost nothing. With an average balance of roughly ₹1.75 lakh earning the 6.5% rate across the tenure, every rupee works — just for different lengths of time. That is the RD's whole point: deposit early, earn long.

RD vs FD vs SIP

• RD vs FD — an FD locks up a lump sum today; an RD builds the same guarantee month by month. If you already have a lump sum, an FD earns more because every rupee starts earning from day one. If you only have monthly savings, an RD is the FD-equivalent discipline.
• RD vs SIP — an RD is safe and guaranteed; a SIP invests in the market and can earn more but carries risk. Many savers use RDs for fixed short-term goals (a car in 3 years, a vacation) and SIPs for long-term wealth.

Practical notes

• Premature closure usually attracts a penalty (often ~1% of the interest, or a lower rate). Pick a tenure you will not break.
• Tax — interest on RDs is fully taxable at your slab rate, and if it crosses the TDS threshold the bank deducts TDS (no 80C-like exemption applies; small savings interest reporting is separate).
• Auto-renew — most banks renew RDs on maturity; check the revised rate at renewal, since older rates often continued at the newer (possibly lower) rates.
• Loan against RD — you can borrow against an RD balance quickly; the deposit acts as collateral and you keep earning interest on it.