RD Interest Rates

Recurring Deposit or RD accounts are a popular low-risk investment vehicle offered by banks and Post Offices. It is particularly suited for the salaried and small investors who can spare a small amount every month to deposit in the RD account. You can choose tenors between six months and ten years to meet your short and long-term financial needs. RD interest rates offered by the banks and Post Offices are identical to those offered in fixed or term deposits with compounding benefits.

Read more
Best Investment Options
  • Save upto ₹46,800 in tax under Sec 80C

  • Inbuilt Life Cover

  • Tax Free Returns Unlike FD

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Get Guaranteed returns along with life cover
invest in 100% Guaranteed Return Plans Tax benefits under sec 80C & No Tax on returns*
+91
View Plans
Please wait. We Are Processing..
Plans available only for people of Indian origin By clicking on "View Plans", you agree to our Privacy Policy and Terms of Use #For a 55 year on investment of 20Lacs #Discount offered by insurance company Tax benefit is subject to changes in tax laws
Get Updates on WhatsApp

Let us learn about the deposit in greater detail. 

What is an RD?

RD is a term deposit product offered by banks and Post Offices where you deposit a fixed amount every month for a fixed tenor. You are paid the accumulated wealth at the end of the term, the value of which is your accumulated principal plus the accrued interest. 

Since the RD is a typical term deposit product, the applied RD interest rates are the same as term deposits. It implies that you enjoy compounding benefits when interest is applied. 

Eligibility Criteria to Earn RD Interest Rates

The eligibility criteria for opening an RD in a bank or Post Office are identical to any term deposit. However, owning a savings account is a prerequisite. Accordingly, the following are eligible to open the account. 

  • Individual savings account holder

  • Minors above 10 years of age

  • Minor below or equal to 10 years of age under natural or legal guardianship

  • A corporate, company, proprietorship, or commercial organization

  • A government organization

Features of an RD Account

You earn a fixed interest in the RD account applied at a fixed frequency to mature at the end of the selected tenor’s end. Thus, RD interest is compounded quarterly in most banks. Your maturity value is paid as the account terminates on maturity. 

Let us check out the critical features.

  • The scheme teaches savings habits to the public.

  • You can open an RD account for a minimum of Rs.100 to benefit small and marginal investors. 

  • The RD tenor is from a minimum of six months to a maximum of ten years.

  • The RD interest rates are the same as fixed deposits, higher than any other savings scheme.

  • You can close your RD account prematurely without any penalty being levied.

  • You can avail of a loan against the RD account as collateral up to 75% of the accumulated balance. However, this may vary across banks.

  • You can pay the monthly instalment in cash, transfer, or through a registered one-time standing instruction to transfer the monthly deposit from your savings or current account. 

RD Interest Rates in Banks

The RD interest rates are similar in most banks. However, you must check out with your bank for the specifics. 

RD Interest Rates effective from 01/10/2021 for Domestic/ NRO Term Deposits 

Maturity Bucket 

Interest Rate in % 

Annualized Yield in %

180 days to 269 days 

4.35

4.37

270 days to 1 year 

4.35

4.40

Over 1 year to 2 years 

5.00

5.09

Over 2 years  to 3 years

5.05

5.28

Over 3 years  to 5 years 

5.05

5.42

Over 5 years  to 8 years 

5.05

5.70

Over 8 years  to 10 years 

5.05

6.18

The above rates are applicable for deposits up to Rs. 2 Cr

Senior citizens earn an additional 0.50% interest over the above card rates, subject to the following conditions:

  • The minimum tenor must be six months.

  • The senior citizen must have attained 60 years of age on the date the RD is booked.

  • The minimum RD instalment must be Rs.100, and Flexi RD amount Rs.1000. 

RD Interest Rates effective from 01/08/2021 for NRE Term Deposits

Maturity Bucket 

Interest Rate in % 

180 days to 269 days 

4.35

270 days to 1 year 

4.35

Over 1 year up to 2 years 

5.00

Over 2 years up to 3 years

5.05

Over 3 years up to 5 years 

5.05

Over 5 years up to 8 years 

5.05

Over 8 years up to 10 years 

5.05

The above rates are applicable for deposits up to Rs.2 Cr

RD Interest Rates Calculation

RD interest rates are calculated considering several factors. The typical compounding frequency in banks is quarterly. 

  1. Maturity Value

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

    The variables used in the above formula are:

    M = Maturity value

    R = Monthly Installment

    n = Number of quarters

    I = Interest Rate / 400

  2. Total Interest

    I = [ { P * n ( n + 1 ) } r / ( 12* 2* 100 ) ]  

    The variables in the formula are:

    I = Total accrued interest at maturity

    n = Number of months

    r = Interest rate per annum

    P = Principal 

    The Maturity Value using the above formula is obtained by:

    M = P (n) + I

    The variables used are:

    M = Maturity Amount

    P(n)  = Invested Principal

    I = Total Accrued Interest. 

RD Interest Rates for Premature Withdrawal

You can close your account prematurely to receive the closure proceeds into your operative savings account. You have to submit a written request and surrender the passbook and a duly signed withdrawal slip for the bank to process. 

RD interest rates are affected as you may not receive the contracted rate. For example, your RD tenor was five years but you withdrew money after one year. The interest rate applied is for one-year deposit period, which is lower than the contracted rate. 

Let us find out if any penal interest is levied. 

Event

Penal Interest

Premature withdrawal after one year for an amount below Rs.5 Lac

Nil

Premature withdrawal before one year for an amount below Rs.5 Lac

0.50%

Premature withdrawal for amount Rs.5 Lac and above 

1.00%

Points to note:

  • No penalty is imposed for premature closure due to the account holder’s death.

  • However, no penalty is imposed on individuals enjoying preferential RD interest rates like the senior citizens. 

In Conclusion

RD account is a term deposit popular among small investors due to its structure where you invest in monthly instalments, unlike lump sum investment. You can start from an amount as low as Rs.100 to warn RD interest rates applied to term deposits and higher than a regular savings account. Moreover, you enjoy all the fixed deposit benefits other than renewal as your RD account terminates on maturity.

FAQ's

  • Q. What is a Flexi RD account?

    A. It is an RD account where you can pay the monthly instalment higher than what is contracted but continue until maturity. You can also skip an instalment without penalties, but every bank does not extend the facility. 
  • Q. Is TDS applicable to interest earned on your RD account?

    A. Yes, the bank applies 10% TDS on the interest earned in your RD account if it exceeds Rs.40000 in a financial year and you have registered your PAN card with them. Senior citizens are exempted from TDS up to Rs.50000 interest earned in a financial year. 
  • Q. Is there a provision for adding a nominee to the RD account?

    A. Yes, you can add a nominee to your RD account while opening it or later by putting a request in the prescribed format. 
  • Q. What happens if you miss an instalment and deposit the defaulted amount later?

    A. The instalment is accepted, but you lose notionally in the interest compounding benefit reflected in the marginally lower maturity value.

Investment plans articles

Recent Articles
Popular Articles
NSC Premature Withdrawal

21 Jun 2022

National Savings Certificate, popularly known as NSC, is a...
Read more
Invest 40 Lakhs for Monthly Income

15 Jun 2022

With Rs. 40 lakhs to invest, you have a lot of options to create...
Read more
Investment Plans for 10 Lakhs

14 Jun 2022

Investing a huge sum of Rs. 10 Lakhs calls for some caution on...
Read more
Kisan Vikas Patra (KVP) Premature Withdrawal

14 Jun 2022

The Indian Post Offices issue Kisan Vikas Patra or KVP to...
Read more
Best Investment Option For Middle Class

02 Jun 2022

In his seminal book Security Analysis, Benjamin Graham, the...
Read more
Best LIC Policies For Investment in 2022
When it comes to purchasing a life insurance plan, 'LIC policies' are the most popular choice for customers. LIC...
Read more
Post Office Monthly Income Scheme - MIS Interest Rate 2022
Are you looking for an investment avenue that is safe and secure, earns substantial returns with a short locking...
Read more
Short Term Investments Options
Short-term investments can be described as temporary investments or marketable securities, which can be easily...
Read more
Best NRE Savings Accounts for NRIs in 2022
India is a growing economy and is getting a lot of global recognition these days. It has shown immense growth in...
Read more
SBI Life Insurance Plans in India
SBI Life Insurance, a joint venture between State Bank of India (SBI) and BNP Paribas Assurance, provides...
Read more
top
Close
Download the Policybazaar app
to manage all your insurance needs.
INSTALL