RD Calculator

What a recurring deposit does

A recurring deposit is a bank product where you commit to depositing a fixed amount every month for an agreed term, earning compound interest at a contracted rate. It sits between a savings account and a fixed deposit: more disciplined and better-paying than the former, more flexible in cash-flow terms than the latter, which demands a large sum upfront.

The key structural point is that each instalment earns interest only for the time it has actually been in the account. Your first deposit earns for the full term; your final deposit earns for one month. This is why an RD's total return is roughly half what you would get from depositing the same total as a lumpsum FD at the start.

The formula

M = R × ((1 + i)ⁿ − 1) / i × (1 + i)

Where R is the monthly instalment, i is the monthly rate, and n is the number of instalments. Banks typically compound RDs quarterly in practice; this calculator uses monthly compounding, which produces a very slightly higher figure. For planning purposes the difference is minor, but your bank's own maturity slip is the authoritative number.

A worked example

Deposit 5,000 a month for three years at 6.5%. You will have paid in 1,80,000 across 36 instalments, and the maturity value comes to roughly 1,98,800 — about 18,800 of interest.

Compare that with depositing 1,80,000 as a single FD at the same rate for the same three years: that returns approximately 2,18,300. The gap of nearly 20,000 exists purely because in the RD, most of your money was in the account for less than the full term. This is not a flaw in the product — it reflects that you did not have 1,80,000 available on day one.

Choosing between an RD and a monthly SIP

Both take a fixed sum from you each month. The difference is what happens to it. An RD gives a guaranteed 6–7.5% with no possibility of loss. An equity SIP has historically averaged more over long periods but can fall in value, sometimes for years at a stretch.

The sensible dividing line is time. For goals within three years — a deposit, a wedding, school fees due next year — an RD's certainty is worth more than the extra percentage points. For anything beyond seven years, the near-guaranteed loss of purchasing power to inflation makes a pure RD approach expensive in real terms. Run both this calculator and the SIP calculator with the same monthly figure to see the spread.

Practical points

• Missed instalments attract a small penalty, and repeated defaults can lead the bank to close the account prematurely at a reduced rate.
• Interest is fully taxable at your slab rate, with TDS applied above the threshold.
• Premature closure is allowed but carries a penalty and a recalculated rate, as with an FD.
• Loans against RD are usually available up to 80–90% of the balance, which can be cheaper than a personal loan if you need short-term liquidity without breaking the deposit.