RD Calculator

A Recurring Deposit (RD) is a savings scheme offered by banks and post offices where you deposit a fixed amount every month for a predetermined tenure. Unlike a Fixed Deposit where you invest a lump sum once, an RD builds the corpus gradually — matching how most salaried people earn and save money.

RDs are one of the safest investment options in India. The interest rate is fixed at the time of opening the account (typically 6.5–7.5% for tenures of 1–10 years). The principal is protected by DICGC insurance up to ₹5 lakh per bank per depositor, and the returns are predictable.

The primary users of RD are: salaried employees building a corpus for a specific short-to-medium term goal (wedding, car, education); senior citizens looking for predictable monthly-savings-based returns; and anyone who wants guaranteed returns without market risk. RD tenure ranges from 6 months to 10 years.

RD interest is compounded quarterly — meaning the interest is calculated four times a year and added to your balance. Each monthly deposit earns interest from the date of deposit until maturity, and the compounding frequency ensures that interest on interest builds up over time.

The formula used by banks: Maturity = Σ (Monthly Deposit × (1 + r/400)^((n−m+1)/3)) for each month m from 1 to n, where r is the annual rate and n is total months. The 400 accounts for quarterly compounding (100 × 4), and the exponent captures how many quarters remain for each monthly instalment to compound.

The practical upshot: the earliest deposits earn the most interest (they compound for the full tenure), and the last deposit earns almost nothing. If you deposit ₹5,000/month for 5 years at 7%, the first ₹5,000 earns interest for 60 months, while the last ₹5,000 earns interest for only 1 month. This is why RD returns are always lower than a lumpsum FD of the same total amount for the same tenure.

**Choose RD if:** You want guaranteed returns, no market risk, and a fixed monthly commitment. RDs are ideal for short-term goals (1–3 years) or as a conservative component of a diversified portfolio. The rate is fixed, so you know exactly what you'll get at maturity.

**Choose SIP if:** You have a 5+ year horizon and can tolerate market volatility. Equity SIPs have historically delivered 10–13% CAGR vs RD's 6.5–7.5%. Over 10+ years, the difference compounds to a massive gap — but you have to ride out market corrections.

**Choose FD if:** You have a lump sum to invest and want to lock in a rate. FDs typically offer slightly higher rates than RDs for the same tenure because the bank has the money upfront. If you have ₹5 lakh and a 5-year horizon, an FD usually beats an RD (of the same monthly-equivalent).

For most investors, the right answer is a combination: RD or FD for near-term goals and safety, SIP for long-term goals and growth. The proportion depends on your risk tolerance and time horizon.