Recurring Deposit (RD): Interest Rates, Schemes

Interest rates on recurring deposit keep on changing from time to time. There are multiple factors for this change and thus it is very important for potential-investors to have a good understanding of RD interest rates prevailing in the market.

Following tables provide different RD rates for regular citizens.

Lenders	Tenure
	1 year	2 years	3 years	4 years	5 years
	Interest rates (% p.a.)
SMALL FINANCE BANKS
AU Small Finance Bank	7.25	7.75	7.50	7.25	7.25
Equitas Small Finance Bank	8.20	7.75	8.00	7.50	7.25
ESAF Small Finance Bank	6.00	8.25	6.75	6.75	6.25
Jana Small Finance Bank	8.25	8.25	8.25	7.25	7.25
NorthEast Small Finance Bank	5.00	7.50	8.50	8.00	8.00
Suryoday Small Finance Bank	6.85	8.50	8.60	6.75	8.25
Ujjivan Small Finance Bank	8.25	7.75	7.20	7.20	7.20
Unity Small Finance Bank	7.85	7.9	8.15	8.15	8.15
Utkarsh Small Finance Bank	6.75	8.00	8.00	6.75	6.75
PRIVATE SECTOR BANKS
Axis Bank	6.70	7.10	7.10	7.10	7.00
Bandhan Bank	8.05	7.25	7.25	7.25	5.85
City Union Bank	7.00	6.50	6.50	6.25	6.25
CSB Bank	5.00	5.50	5.75	5.75	5.75
DBS Bank	7.00	7.00	6.50	6.50	6.50
DCB Bank	7.10	7.50	7.55	7.40	7.40
Federal Bank	6.80	7.05	7.00	7.00	6.60
HDFC Bank	6.60	7.00	7.00	7.00	7.00
ICICI Bank	6.70	7.25	7.00	7.00	7.00
IDFC First Bank	6.50	6.00	6.00	6.00	6.00
IndusInd Bank	7.75	7.75	7.25	7.25	7.25
Jammu & Kashmir Bank	7.00	7.00	6.75	6.75	6.50
Karur Vysya Bank	7.00	7.00	7.00	7.00	7.00
Karnataka Bank	7.35	7.35	6.50	6.50	6.50
Kotak Mahindra Bank	7.10	7.15	7.00	7.00	6.20
RBL Bank	7.50	7.50	7.10	7.10	7.10
SBM Bank India	7.05	8.25	7.30	7.40	7.75
South Indian Bank	6.70	6.50	6.70	6.70	6.00
Tamilnad Mercantile Bank	7.00	6.75	6.50	6.50	6.50
YES Bank	7.25	7.25	7.25	7.25	7.25
PUBLIC SECTOR BANKS
Bank of Baroda	6.85	7.00	7.15	6.50	6.50
Bank of India	6.80	6.80	6.50	6.50	6.00
Bank of Maharashtra	6.75	6.50	6.50	6.50	6.50
Canara Bank	6.85	6.85	6.80	6.80	6.70
Central Bank of India	6.85	7.00	6.75	6.75	6.50
Indian Bank	6.10	6.70	6.25	6.25	6.25
Indian Overseas Bank	7.10	6.80	6.50	6.50	6.50
Punjab National Bank	6.80	6.80	7.00	6.50	6.50
Punjab & Sind Bank	6.30	6.00	6.00	6.00	6.00
State Bank of India	6.80	7.00	6.75	6.75	6.50
Union Bank of India	6.80	6.60	6.70	6.50	6.50
FOREIGN BANKS
Deutsche Bank	7.00	8.00	8.00	7.00	7.50
HSBC Bank	4.00	4.35	7.00	6.00	6.00
Standard Chartered Bank	7.15	7.50	–	–	–

A recurring deposit earns interest at a pre-specified rate over the period chosen by the investor. The interest will be added to the principal amount at a certain frequency or at maturity. When the RD matures, investor is paid the actual amount invested plus the total interest earned in the entire tenure.

Key features of recurring deposit

• Aimed to inculcate a regular habit of saving money
• Deposit amounts are highly affordable, starting from as low as Rs. 100 per month while it can go up to Rs. 15 lakh (or more for certain banks)
• Customers may choose from deposit term of 6 months to 120 months
• Earns higher returns than investing in a savings account
• Loan against deposits can be taken keeping the RD as collateral
• Premature withdrawals are not allowed

Benefits of investing in a recurring deposit:

• Ease of investing monthly
• Loan or overdraft facilities available
• Investor can nominate someone to receive the maturity amount, in case they are not around
• High interest rates identical to FD rates, thus making it a lucrative but safe investment option for risk-averse investors

Just like a fixed deposit scheme, interest income earned on recurring deposit is added to the annual income of the investor. This income is added to the ‘Income from Other Sources’ head and is fully taxable as per the applicable income tax slab.

If this income earned from bank or post office deposits amounts to Rs. 40,000 or less, no tax is levied. But if it goes beyond the limit, banks charge 10% as TDS (Tax Deducted at Source).

Individuals falling under the 5% income tax slab can file Income Tax Return to claim refund. Any individual not liable to pay any income tax should submit form 15G to their respective banks so as to avoid TDS deduction. Senior citizens are liable to submit Form 15H to avoid TDS deduction.

Please note that the aforementioned forms are to be submitted every financial year for each recurring deposit owned by the individual.

In order to make a well-informed decision, it is important to get an estimate of the returns that can be earned on investing in an RD. Paisabazaar’s RD Calculator might come handy in ascertaining the same.

Simply click here to calculate the maturity amount.

Enter the monthly deposit amount, rate of interest and the deposit tenure to check the potential earnings by investing in a recurring deposit.

Fixed deposit as well as recurring deposit both account for a safe investment option. Banks provide same interest rates for both the types of term deposits.

Though being almost the same, there are some staggering differences between fixed deposit and recurring deposit. Below mentioned are some of the important difference points between the two:

Fixed Deposit	Recurring Deposit
Entire deposit amount is to be paid at once	Deposit amount is paid in monthly instalments
No capping on maximum deposit amount (may vary for different banks)	Max. deposit amount capped at Rs. 15 lakh (may vary for some banks)
Deposit term ranges from 7 days to 10 years	Deposit term ranges from 6 months to 10 years
Interest is levied on the entire amount thus earning slightly higher returns as compared to RD	Interest is levied on monthly installments, thus lowering the returns to be earned

Useful Article: Fixed Deposit vs Recurring Deposit : Which is the better option?

To open an RD account, customer must keep the following documents ready:

• Photo ID proof (Aadhaar card, PAN card, Passport, etc.)
• Address proof (Any latest Utility bill, Aadhaar card, Ration card, etc.)
• PAN card
• Application form (duly filled in and signed)
• Passport size photographs

Note: This is not an exhaustive list.

Any individual can open a recurring deposit account online and offline as well. To apply for a recurring deposit online, account holders can visit the official bank website or login to the netbanking portal or mobile banking app and apply for a recurring deposit online.

To apply for a recurring deposit offline, account holders can visit the nearest bank branch or contact customer care for further enquiries / queries.

Q. What is the minimum tenure for recurring deposits?

A. The minimum tenure varies from bank to bank. But usually it is 6 months.

Q. Which is better, FD or RD?

A. As far as the returns are concerned, investing in a fixed deposit is more beneficial as it gives higher returns compared to recurring deposits. If the factor of concern is flexibility of making deposits, RD has an upper hand. For investing in an FD, one has to make the entire payment at one go whereas for an RD, investments can be made on monthly basis.

Q. Is the interest earned on RD taxable?

A. Yes, the interest earned on recurring deposit is taxable as per the income tax slab applicable.

Q. Can one open an RD with the bank where he/she doesn’t have a savings account?

A. It depends on the bank. Some banks open RD for non-customers while some provide the facility for existing customers only.

Q. Are there any benefits for senior citizens?

A. Yes. Most of the banks offer a preferential interest rate on RD for senior citizens. It is usually 0.50% higher than the general rate.

Q. Can one withdraw RD before maturity?

A. No. In case the bank allows this, premature withdrawal penalty will be charged, though some of the banks provide facility for partial withdrawals.

Q. Can an investor mention nominees for his/her recurring deposit account?

A. Yes. Nomination facility is provided by the banks.

Q. What will be the maturity amount of an RD?

A. The amount one gets at maturity will be the deposited sum plus the interest earned. If the RD offers some extra incentives, it will also be added to the maturity amount.

Q. Can an NRI open Recurring Deposit account in India?

A. Yes. NRIs can open an RD with banks in India.

Q. How much penalty is charged for premature withdrawal?

A. The premature withdrawal penalty differs from bank to bank.