Recurring Deposits (RDs) are a popular and risk-free investment option in India, especially suited for individuals with a regular income. They let you deposit a fixed amount every month into your RD account for a chosen tenure, typically between 6 months and 10 years. With interest rates ranging from 3% to 8.50% p.a., RDs offer flexibility and steady returns, making them a convenient alternative to Fixed Deposits (FDs), which require a one-time lump sum.
This article will guide you through how RDs work, the different types of RD accounts, interest rates across banks, their benefits, and how to open or close one.
Here are some important details to know while understanding everything about RDs in 2025:
Particulars
| Details |
Interest Rate Range | From 3.00% p.a. to 8.50% p.a. |
Minimum Deposit Amount | Starts from Rs. 100 |
Tenure of the Investment | 6 months to 10 years |
Interest Compound Frequency | Quarterly |
Partial Withdrawal | Not Allowed |
Premature Closure | Allowed with penalty |
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:
Bank RD | RD Interest Rates for General Public (per annum) | RD Interest Rates for Senior Citizens (per annum) |
3.50% to 7.30% | 4.00% to 7.80% | |
6.80% to 7.00% | 7.30% to 7.50% | |
3.00% to 7.30% | 3.50% to 7.80% | |
6.25% to 7.25% | 6.75% to 7.75% | |
6.00% to 7.40% | 6.50% to 7.90% | |
5.50% to 8.00% | 6.00% to 8.50% | |
3.85% to 7.10% | 4.35% to 7.60% | |
3.50% to 7.25% | 4.00% to 7.75% | |
4.75% to 7.25% | 5.25% to 7.80% | |
6.25% to 7.00% | 6.75% to 7.50% | |
4.50% to 7.20% | 5.00% to 7.75% | |
4.50% to 6.50% | 5.00% to 7.00% | |
4.25% to 7.15% | 4.75% to 7.65% | |
6.25% to 7.25% | 6.65% to 7.75% | |
5.75% to 7.25% | 6.25% to 7.75% | |
Karnataka Bank RD | 3.50% to 7.25% | 4.00% to 7.75% |
IndusInd Bank RD | 6.35% to 7.75% | 6.85% to 8.25% |
City Union Bank RD | 5.00% to 7.50% | 5.00% to 8.00% |
Bandhan Bank RD | 3.00% to 8.05% | 3.75% to 8.55% |
Yes Bank RD | 6.10% to 7.75% | 6.60% to 8.25% |
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 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.
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.
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.
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.
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.
Here are some essential features of recurring deposits:
To open an RD account in a bank, the following criteria apply:
To open an RD account at your preferred financial institution, you will need:
There are two ways in which you can open a recurring deposit account with your preferred bank:
Online Application:
Step 1: Sign into your bank’s net banking or mobile banking account.
Step 2: Select the option of ‘Open an e-RD Account’ on your dashboard.
Step 3: Specify the account number for debit, preferred instalment amount, and investment period. Review the applicable RD interest rate and designate a nominee.
Step 4: Confirm acceptance of terms and conditions, ensuring to check the projected maturity amount.
Step 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:
Step 1: Visit the nearest bank branch where you hold a savings account.
Step 2: Complete the RD application form, including details such as instalment amount, payment mode, deposit duration, nominee information, and other necessary data.
Step 3: Make the first instalment payment via cheque or cash.
Step 4: The bank representative will process your application within a stipulated time frame.
To close your RD account after maturity and withdraw the amount, follow these steps:
Step 1: Take your RD account number, passbook, and ID proof to the bank branch where the RD account was opened.
Step 2: You will be provided with the RD account closing form, in which you will need to fill out with all the details.
Step 3: Submit the completed form along with proof of your ID for verification.
Step 4: The bank will process your RD withdrawal request and verify your details.
Step 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.
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:
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.