Recurring Deposit Maturity Summary
What is a Recurring Deposit (RD)?
A Recurring Deposit (RD) is a savings product offered by banks and post offices in India where you deposit a fixed amount every month for a predetermined tenure. At the end of the tenure, you receive the total principal plus accumulated interest. RDs are ideal for people who want to save regularly from their monthly income.
RD Interest Calculation Method
Indian banks calculate RD interest using quarterly compounding on each monthly instalment. The formula is: M = R × [(1+i)^n − 1] / (1 − (1+i)^(-1/3)), where M is the maturity value, R is the monthly deposit, i is the quarterly interest rate (annual rate ÷ 4 ÷ 100), and n is the number of quarters. This is the standard formula used by SBI, Post Office, HDFC, and all major Indian banks.
RD vs SIP — Which is Better?
Both RD and SIP involve monthly investments. RDs offer guaranteed, fixed returns (currently 6%–7.5% p.a.) making them suitable for risk-averse investors and short-term goals. SIPs in mutual funds offer potentially higher returns (10%–15% historically) but with market-linked risk. RDs are ideal for goals within 1–5 years; SIPs are better for long-term wealth creation over 5+ years.
Post Office RD
The Post Office Recurring Deposit (PO RD) offers a government-backed interest rate, currently 6.7% p.a. compounded quarterly. It has a fixed tenure of 5 years and a minimum monthly deposit of ₹100. It is one of the safest RD options in India with sovereign backing, making it popular in rural and semi-urban India.