What is a Recurring Deposit (RD)?
A Recurring Deposit (RD) is a specialized term deposit offered by Indian banks and post offices. It is designed for individuals who want to save a fixed amount of money every month and earn an interest rate comparable to a Fixed Deposit (FD).
If you don't have a large lumpsum amount to open an FD, an RD is the perfect alternative. It forces financial discipline by automatically deducting a set amount from your savings account every month, growing your wealth predictably with zero exposure to stock market volatility.
RD vs. SIP: Which is better?
While both require monthly contributions, they serve entirely different financial goals:
- Mutual Fund SIPs: Your money is invested in the stock market. Returns are highly volatile but generally beat inflation over a 7-10 year horizon. Best for long-term wealth creation.
- Bank RDs: Your money is lent to the bank. Returns are 100% guaranteed but are generally lower than equity markets. Best for short-term goals (1-3 years) where capital protection is your absolute top priority.
How the Math Works
Calculating RD maturity is complex because every monthly deposit earns interest for a different duration. Your first deposit earns interest for the full 5 years, while your final deposit only earns interest for 1 month.
Additionally, banks in India compound RD interest quarterly. Our calculator uses a precise month-by-month iterative engine to replicate the exact algorithm used by major banks (like SBI and HDFC) to give you a mathematically perfect projection.
When to use an RD
RDs shine when you are saving for a specific, non-negotiable expense that will occur in the near future. You cannot afford to risk this money in the stock market.
- ✅ Saving for a car down payment in 2 years.
- ✅ Accumulating your child's annual school fees.
- ✅ Planning a family vacation next year.
- ✅ Building your initial emergency fund.