Recurring Deposits - RD Interest Rates 2025: Benefits, Features, and How to Open RD Account

Recurring deposits (RD) are among the most favoured risk-free investment options in India. This investment tool is designed for individuals with regular incomes, allowing them to accumulate a fixed sum monthly into an RD account over a predetermined tenure. By opening an RD account, investors can enjoy interest rates on recurring deposits ranging from approximately 3.00% p.a. to 8.50% p.a. 

While the RD interest rates are comparable to those of fixed deposits (FDs), the flexibility of making monthly instalments makes RDs particularly appealing. The minimum tenure for these deposits ranges from 6 months to 10 years.

Recurring Deposit Scheme Highlights for 2024

Here are some important details to know while understanding everything about RDs in 2024:

Best RD Interest Rates for Different Banks in 2025

Although RD interest rates are generally similar across various banks, it is crucial to verify the specifics with your chosen institution. Here is a summary of the RD interest rates 2025 offered by major banks:

Types of RD Accounts

There are various types of Recurring Deposit (RD) accounts to suit different financial goals and individual requirements. Let us explore each of these types in detail:

• Regular RD Accounts

Regular RD accounts are the most common and widely available RD schemes offered by almost all banks and financial institutions. This type of RD is ideal for salaried individuals or those who prefer to save a fixed amount every month.

You choose a specific amount to deposit monthly for a fixed tenure (usually between 6 months and 10 years). The interest earned is calculated either on a simple or compound interest basis, depending on the bank.

• RD Accounts for Senior Citizens

These RD accounts are designed specifically for senior citizens (individuals aged 60 and above). Given their reduced earning capacity post-retirement, senior citizens are offered special benefits like higher interest rates.

Senior citizens usually receive an additional 0.50% to 0.75% interest over the regular RD rates. This higher interest rate helps them earn better returns on their savings, ensuring financial stability in their later years.

• RD Accounts for Minors

These accounts allow minors (below the age of 18) to start building savings early with the help of a parent or guardian, who will operate the account on their behalf. It’s a great way to cultivate a savings habit from a young age.

Parents or guardians can open an RD account for their children and make regular deposits. Once the minor reaches adulthood, the account can be transferred to them. Parents who want to secure their child’s financial future or teach them the importance of saving from a young age can open this account.

• NRE (Non-Resident External) Recurring Deposit Accounts

This type of RD is specifically for Non-Resident Indians (NRIs) who wish to save and invest their earnings in India. It allows them to save regularly in Indian Rupees while residing abroad.

NRE RD accounts offer competitive RD interest rates similar to those provided to residents. The interest earned is usually tax-free in India. NRIs who wish to maintain their financial ties to India while earning a decent return on their investments in Indian Rupees can choose this account.

How to Calculate Recurring Deposit Interest Rate 2024?

The interest accrued on a recurring deposit adheres to the principles of compounding. The formula used to calculate the maturity amount is as follows:

M = R[(1+i)^n-1]/(1-(1+i)^(-1/3)]

Where:

M = Maturity Value

R = Monthly Installment

n = Number of quarters

i = Rate of interest

For instance, if you invest Rs. 5,000 in a bank RD at an interest rate of 7.5% per annum for 60 months, the maturity amount would be calculated as follows:

M = 5000 [(1+0.075)^4-1]/(1-(1+0.075)^(-1/3)] = Rs. 62,478.46

Consider using the RD Calculator to get the estimated returns based on the tenure and monthly deposit amount. It helps you get accurate results in no time while also allowing you the flexibility to change the details and calculate until you are satisfied with the results.

Features of Recurring Deposits

Here are some essential features of recurring deposits:

• Minimum Deposit Amount: The minimum deposit amount varies by bank, with some banks allowing as little as Rs. 100 to be deposited.
• Tenure Options: Investors can select a deposit period ranging from 6 months to 10 years, providing flexibility in investment choices.
• Standing Instructions for Deposits: You can set up automatic transfers from your savings or current account to fund your RD account periodically.
• Withdrawal Restrictions: Most banks do not permit premature or mid-term withdrawals. However, some may allow it with applicable penalties.
• Competitive Interest Rates: The recurring deposit interest rates are typically on par with those of fixed deposits, offering returns that exceed those of regular savings accounts.
• Loan Facility: Investors can take loans against their deposits, generally up to 80%-90% of the deposit value, although this varies by lender.

Eligibility for Opening RD Interest Rate Account

To open an RD account in a bank, the following criteria apply:

• Any individual is eligible to open an RD account.
• Minors below or equal to 10 years of age can open an RD account under the guardianship of a natural or legal guardian.
• Any corporate company, proprietorship, or commercial organisation is eligible to open an RD account.
• Any government organisation is also eligible to open an RD account.

Documents Required for Opening RD Account

To open an RD account at your preferred financial institution, you will need:

• A recurring deposit account opening form.
• Two passport-sized photographs.
• Address proof such as driving licence, utility bills, Aadhaar card, Voter ID or PAN card.
• Identity proof such as Aadhaar card, Voter ID, driving license or PAN card.

How to Open an RD Account?

There are two ways in which you can open a recurring deposit account with your preferred bank: 

Online Application:

1. Sign into your bank’s net banking or mobile banking account.
2. Select the option of ‘Open an e-RD Account’ on your dashboard.
3. Specify the account number for debit, preferred instalment amount, and investment period. Review the applicable RD interest rate and designate a nominee.
4. Confirm acceptance of terms and conditions, ensuring to check the projected maturity amount.
5. A confirmation message will appear, and a receipt will be sent to your registered email address. The specified amount will then be debited.

Offline Application:

1. Visit the nearest bank branch where you hold a savings account.
2. Complete the RD application form, including details such as instalment amount, payment mode, deposit duration, nominee information, and other necessary data.
3. Make the first instalment payment via cheque or cash.
4. The bank representative will process your application within a stipulated time frame.

How to Close an RD Account?

To close your RD account after maturity and withdraw the amount, follow these steps:

1. Take your RD account number, passbook, and ID proof to the bank branch where the RD account was opened.
2. You will be provided with the RD account closing form, in which you will need to fill out with all the details.
3. Submit the completed form along with proof of your ID for verification.
4. The bank will process your RD withdrawal request and verify your details.
5. The RD account will be closed, and the amount will be transferred to your linked savings account or current account.

Procedures may vary depending on the bank. Always check with your bank for specific details on closing an RD account and withdrawing the amount after maturity.

Benefits of RD Account

Investing in a recurring deposit account is a smart choice, as the principal amount invested is almost guaranteed to provide a return. The offered rate of return is also attractive, making the RD an intelligent investment option. Some other benefits of investing money in an RD account include:

• Simple Investment Product: RD is one of the simplest financial products in which to invest. It is ideal for new investors and helps develop disciplined saving habits.
• Guaranteed Returns: Unlike volatile investments like equity or mutual funds, RDs offer guaranteed returns on the principal amount.
• Flexible Tenure: The tenure can range from 6 months to 10 years. Investors can choose short-term, medium-term, or long-term options based on their goals.
• Low Minimum Deposit: You can start with a minimum deposit of Rs. 100 for public sector banks, while private banks may require a minimum of Rs. 500 to Rs. 1,000.
• Premature Closure: Some banks allow premature withdrawal or closure, though a small fee may be charged. This provides liquidity in case of financial emergencies.
• Loan Against RD: Banks offer loans against recurring deposits, allowing you to borrow up to 90%-95% of the RD balance.
• Flexible RD Options: Flexible RD schemes let you deposit any amount greater than the minimum at any time. Some banks even allow missed instalments without penalties.
• Encourages Saving Habits: RD schemes instil a sense of savings discipline in the public, making them an effective tool for financial planning.

RD Premature Withdrawal Rules

If you wish to close an RD before maturity, the banks may charge a penalty ranging from 0.5% to 1% of the deposit amount. Some banks allow premature withdrawal, while some may not allow it. Thus, checking with the bank regarding the premature withdrawal rules and the penalty charged for it before opening an RD account is essential.

A Recurring Deposit (RD) account is a popular and reliable savings tool, especially for small investors who prefer disciplined, monthly investments rather than a lump-sum deposit. RD accounts offer guaranteed returns and are structured in a way that makes them accessible to almost anyone. 

Whether you are a salaried employee, a retiree, or even a minor, you can start with as little as Rs. 100, and you will earn an RD interest rate that is typically higher than those on regular savings accounts. Given the simplicity of this financial product, it is an ideal starting point for new investors while also serving as a secure investment option for those seeking guaranteed returns.