Many people think saving money means you need to set aside big amounts every month. But in reality, this is not true. You can start small, and still make a good corpus over time. Recurring Deposits (RDs) are one of the easiest ways to save money regularly, even if the amount is small.
RD helps in creating a habit of disciplined savings. Whether you are a student, salaried person, or a homemaker, this is a great way to slowly build wealth without stress. Let’s understand how RD works and how it can help you multiply your money.
What is a Recurring Deposit (RD)?
Recurring Deposit or RD is a financial product offered by banks and post offices in India. It allows you to deposit a fixed amount every month for a selected period (like 6 months, 1 year, 5 years, etc.). In return, you get interest on the money, which is added at regular intervals. Once your RD matures, you get the full amount with interest.
Why RD is Ideal for Small Savers?
- Small Monthly Commitment: You can start an RD with as low as Rs.100 or Rs.500 per month depending on the bank or post office.
- No Market Risk: Your money is safe. The interest rate is fixed, unlike mutual funds or stock market investments.
- Regular Habit of Saving: Since you need to deposit monthly, it builds a disciplined saving habit.
- Guaranteed Returns: You know in advance how much you’ll get at the end.
Who Should Choose RD?
- New Earners who have just started their jobs
- Homemakers who save from monthly household budgets
- Students who get pocket money and want to learn savings
- Senior citizens looking for stable returns
- Small business owners who earn daily or weekly
Anyone who wants to develop the habit of savings but doesn’t want to take risks can go for RD.
Different Types of RD Available in India
1. Regular Recurring Deposit
This is the most common RD account. You deposit a fixed sum every month for a fixed period and get returns with interest.
2. Flexi RD
Some banks offer flexible RD where the depositor can deposit different amounts every month instead of a fixed sum.
3. Post Office RD
The 5-year Post Office RD is one of the most trusted RD options, especially in rural and semi-urban areas. It gives decent interest and is government-backed.
4. Senior Citizen RD
Some banks offer slightly higher interest rates for senior citizens, making it a good option for retired people.
How Does RD Work? A Simple Example
Suppose you start an RD of Rs.1000 per month for 5 years at an interest rate of 6.5% p.a.
- Total Principal: Rs.1000 × 60 months = Rs. 60,000
- Maturity Amount (with interest): Approx Rs. 70,000 to Rs. 72,000
You gain around Rs. 10,000 to Rs. 12,000 without taking any market risk.
Interest Rates on RD
RD interest rates vary from bank to bank. Generally, it ranges between 5% to 7.5% per annum.
| Bank/Post Office | Interest Rate (p.a.) | Minimum Monthly Deposit |
| SBI | 6.5% | Rs.100 |
| HDFC Bank | 7.00% | Rs.1000 |
| ICICI Bank | 6.90% | Rs.500 |
| Post Office RD | 6.70% | Rs.100 |
| Axis Bank | 7.10% | Rs.500 |
Rates change from time to time. Please check the latest before investing.
Documents Required to Open an RD Account
- Aadhaar Card
- PAN Card
- Passport size photo
- Address proof (Voter ID, Electricity Bill, etc.)
- Bank account (if opening online, use internet banking or app)
Tenure Options in RD
Most banks and post offices offer RD for the following durations:
- 6 months
- 1 year
- 2 years
- 3 years
- 5 years
- Up to 10 years in some banks
Longer duration gives better interest rates. So if you don’t need money soon, go for 3 or 5-year RDs.
RD vs FD: What’s the Difference?
| Factor | RD (Recurring Deposit) | FD (Fixed Deposit) |
| Investment Style | Monthly small amounts | One-time lump sum |
| Ideal for | Regular savers | One-time large investors |
| Interest Rate | Slightly lower than FD | Slightly higher |
| Flexibility | Fixed monthly deposit needed | Full amount locked at once |
Online RD – Save at Your Fingertips
Now most banks and post offices allow you to open RD online using mobile apps or internet banking. This makes it super easy to:
- Start a new RD
- Track existing RD
- Check maturity amount
- Close or renew RD online
TDS and Taxation on RD
- Interest earned on RD is taxable.
- If interest earned exceeds Rs.40,000 in a year (Rs.50,000 for senior citizens), TDS (Tax Deducted at Source) is applied.
- To avoid TDS, you can submit Form 15G/15H.
Tips to Maximize Returns from RD
- Start early – Longer tenure gives more compounding benefits.
- Choose high-interest banks – Compare interest rates before choosing.
- Avoid premature withdrawal – It reduces interest and may attract penalties.
- Use multiple RDs – Start more than one RD for different goals (education, travel, emergency).
- Automate monthly debit – Link RD to your account so amount is debited automatically.
RD for Specific Goals
You can use RD to meet various small and medium-term goals:
- Children’s school fees
- Saving for festivals and marriages
- Emergency medical fund
- Travel or vacation planning
- Buying gadgets or two-wheelers
This makes RD not just a saving tool but a financial planning partner.
Is RD Safe?
Yes, RDs are very safe because:
- Offered by RBI-regulated banks and government post offices
- Returns are fixed
- Your money is not affected by market ups and downs
Even if a bank shuts down (very rare), deposits up to Rs.5 lakhs are protected by DICGC insurance.
Why RD is a Good Start for First-Time Investors
For someone who is afraid of investing in stocks or mutual funds, RD gives a confidence boost. You learn to manage money, understand savings, and see results.
With a habit of saving Rs.1000 per month, you are building Rs. 12,000 per year plus interest. In 5 years, that becomes more than Rs. 70,000. Slowly, you’ll gain confidence to explore other investments too.
