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Recurring Deposit

RDs offer flexibility in deposit amounts, allowing account holders to invest a fixed sum each month while earning competitive interest rates.

  • 1,517 Views | Updated on: May 06, 2024

Recurring Deposit (RD) accounts offer a blend of reliability and flexibility, and are cherished by investors seeking assured returns while maintaining control over their investments.

Key Takeaways

  • RDs offer guaranteed returns on the deposited amount, providing investors with certainty about the earnings of their investment.
  • They give higher interest rates compared to regular savings accounts, allowing investors to earn competitive returns on their savings.
  • Investors can choose the amount they want to deposit monthly, making it accessible to individuals with varying income levels and financial goals.
  • With a flexible range of tenure options, it allows investors to select a duration that suits their investment horizon and financial objectives.
  • Some banks offer overdraft facilities against RDs, allowing account holders to borrow money against their RD deposits at favorable interest rates.

Think of an RD as a flexible savings plan: Unlike Fixed Deposits (FDs) where you invest a lump sum, recurring deposits allow you to set aside a fixed amount each month, similar to a salary deduction. You will earn interest on your deposits, just like with FDs. It is a great way to grow your savings gradually and build a habit of regular saving.

What is a Recurring Deposit Account?

A Recurring Deposit, commonly called RD, is a distinct term-deposit product provided by Indian Banks, enabling individuals to regularly invest and earn returns on their investments. With their features of consistent deposits and accruing interest, RDs offer users flexibility and simplicity in investing. RDs serve as an optimal saving and investment tool. You can also calculate the return amount on your deposits using an RD calculator.

Types of Recurring Deposits

Various types of RD investment plans cater to different needs and preferences. Let us explore these different types:

Regular Recurring Deposit Account

This is the standard recurring deposit account where a fixed amount is deposited at regular intervals (usually monthly) for a predetermined period at a fixed interest rate.

Flexible Recurring Deposit

In a flexible RD, investors have the option to vary the amount deposited each month within certain limits. This type of RD provides more flexibility in managing monthly contributions according to changes in financial circumstances. However, the interest rates and tenure are typically predetermined by the bank or financial institution.

How Does a Recurring Deposit Account Work?

An RD account works by enabling individuals to deposit a fixed amount of money into the account on a monthly basis for a predetermined period.

To open an RD account, an individual need to visit a bank or financial institution and fill out the necessary forms, providing identification and address proof documents. The depositor selects the monthly deposit amount and the tenure of the RD account based on their financial goals and capabilities. The minimum deposit amount and tenure vary depending on the bank’s policies.

Once the RD account is opened, the depositor needs to make regular monthly deposits into the account. The fixed amount chosen by the depositor is deducted automatically from their linked savings or current account each month. The deposited amount earns interest at a predetermined rate set by the bank. Interest is typically calculated on a quarterly basis and compounded quarterly, although this can vary depending on the bank’s policies.

At the end of the predetermined tenure, the RD matures, and the depositor receives the principal amount along with the accrued interest. This maturity amount can be paid out as a lump sum or reinvested into another RD account. While RDs are designed for fixed-term investments, most banks allow premature withdrawal of funds, subject to certain conditions and penalties.

What are the Features of a Recurring Deposit Account?

Different features make recurring deposits an attractive investment option for individuals looking for a disciplined savings tool with guaranteed returns. Some of these features include:

Assured Returns

Recurring deposits offer guaranteed returns on the deposited amount, providing investors with certainty about the earnings on their investment. Currently, recurring deposit interest rates range between 4.5% and 7.75%.

Higher Interest Rate

Recurring deposits typically offer higher interest rates compared to regular savings accounts, allowing investors to earn competitive returns on their savings.

Flexible Investment Amount

Investors have the flexibility to choose the amount they want to deposit monthly, making RDs accessible to individuals with varying income levels and financial goals.

Flexible Tenure

Recurring deposits offer a range of tenure options, typically ranging from 6 months to 10 years, allowing investors to select a duration that suits their investment horizon and financial objectives.

Overdraft Facility

Some banks offer overdraft facilities against RDs, allowing account holders to borrow money against their RD deposits at favorable interest rates.

Lock-in Period

While RDs have a fixed tenure, they usually do not have a lock-in period, meaning investors can withdraw their funds prematurely if needed, albeit with certain penalties and conditions.

What are the Benefits of Having an RD Account?

Having an RD account comes with several advantages, such as having fixed interest rates and offering the choice of amount and how long you want to invest. Let us take a quick look at some recurring deposit benefits:

Simplified Investment Product

RDs provide a straightforward way to save and invest regularly, making them suitable for individuals who prefer a systematic approach to saving.

Guarantee of Returns

RDs offer a fixed interest rate, providing investors with the assurance of returns on their investment at maturity.

Choice of Investment Term and Amount

Investors can choose the term (tenure) of the RD and the amount to be deposited each month, allowing for flexibility based on financial goals and capabilities.

Ease of Withdrawal

While recurring deposits are designed for fixed-term investments, they offer some flexibility in terms of premature withdrawal, albeit with penalties. This feature provides a degree of liquidity compared to some other investment options.

Loan Against Recurring Deposits

Many banks allow customers to avail loans against their RDs, providing access to funds in times of need without having to break the RD prematurely. This feature can be useful in managing short-term financial requirements without disrupting long-term savings goals.

Who can Invest in an RD Account?

Anyone with a source of income and valid identity proof can invest in a Recurring Deposit (RD) account. This includes:

  • Individuals: Both salaried and self-employed individuals can invest in RD accounts.
  • Minors: Minors can open RD accounts jointly with their guardians or parents. The guardian will manage the account until the minor reaches the age of majority.
  • Senior Citizens: Senior citizens can invest in RD accounts to generate regular income during retirement.
  • Hindu Undivided Families (HUFs): HUFs can also invest in RD accounts, provided they furnish the required documents.
  • Trusts and Organizations: Some banks or financial institutions may allow trusts, clubs, societies, and other organizations to open RD accounts.

Also, note that checking with the specific bank or financial institution regarding their eligibility criteria and documentation requirements before opening an RD account is essential.

What are the Documents Required to Open an RD Account?

To open an RD account, you typically need the following documents:

Identity Proof

Any government-issued photo identification document such as an Aadhar card, PAN card, passport, voter ID card, or driving license.

Address Proof

Documents confirming your residential address, which can include an Aadhar card, utility bills (electricity, water, telephone), rent agreement, or bank statements.

Passport Size Photographs

Usually, two passport-size photographs are required for account opening purposes.

PAN Card

Providing your Permanent Account Number (PAN) card is mandatory for most financial transactions in India, including opening an RD account. However, if your investment amount is less than ₹50,000 in a financial year, you may not need to provide your PAN card.

Filled Application Form

You need to complete and sign the application form provided by the bank or financial institution where you intend to open the RD account.

Additional Documents for Minors and Joint Account Holders

If opening the recurring deposit account for a minor or as a joint account, additional documents such as the minor’s birth certificate, guardian’s identity, address proof, or joint account holder’s details may be required.

What Factors Should You Consider Before Opening an RD Account?

Before opening an RD account, there are several factors you should consider. By evaluating these factors, you can make an informed decision when opening an RD account:

Rate of Interest

Compare the interest rates offered by different banks or financial institutions. Even a slight difference in interest rates can significantly impact your returns over the tenure of the RD. You should opt for the highest interest rate available to maximize your earnings.

Amount of Investment

Determine the amount you can comfortably deposit each month into the RD. While there might be a minimum deposit requirement, consider your financial situation and ensure the monthly installment fits your budget without causing strain on your finances.

Investment Tenure

Assess your financial goals and choose an RD tenure that aligns with them. Shorter tenures might offer lower interest rates but provide quicker access to funds, while longer tenures often yield higher interest rates but tie up your funds for a longer period. Consider factors such as upcoming expenses, future financial goals, and liquidity needs before deciding on the tenure.

Tax on Interest Income

Understand the tax implications of the interest earned on RDs. Interest income from RDs is taxable as per the individual’s income tax slab. Consider the impact of taxation on your overall returns and factor it into your investment decision. Additionally, explore tax-saving RD options if available, such as those offered by some banks under the Income Tax Act, which offer tax benefits under Section 80C.

How to Open an RD Account Online?

You have to follow these steps to open a Recurring Deposit (RD) account both online:

  • Log in to your Banking App or Net Banking: Use your existing credentials to access your bank’s online banking platform (mobile app or website).
  • Find the RD Account Option: Look for a section on “Deposits,” “Open an Account,” or similar options. You might find a specific tab for “Recurring Deposits.”
  • Choose Your RD Details: Specify the amount you want to deposit each month (installment amount), the tenure (duration) of your RD, and the type of account (single or joint).
  • Select Fund Source: Choose the bank account from which your monthly installments will be deducted automatically.
  • Review and Submit: Carefully review all the details like interest rate, maturity amount, and nominee information (optional: the person who receives the RD proceeds if you pass away). Once confirmed, submit the online application.

How to Open an RD Account Offline?

Here are the steps to follow to open RD account offline:

  • Visit Your Bank Branch: Go to your nearest bank branch where you have a savings account (or are comfortable opening one).
  • Meet a Bank Representative: Inform them of your intention to open a Recurring Deposit account.
  • Fill Out the RD Application Form: The bank representative will provide you with an RD application form. Fill in the details like your name, address, desired deposit amount, tenure, nominee (optional), etc.
  • Submit the Application and Initial Deposit: Attach any required documents (like ID proof, and address proof) and make your first installment deposit along with the completed application form.
  • Account Opening Confirmation: The bank representative will process your application and inform you once your RD account is active. You will receive an account number and details for future reference.

Kotak Life Insurance RD Calculator

To calculate your returns on recurring deposits, you can use Recurring Deposit (RD) calculator by Kotak life. Add your expected monthly investment that you can commit, the tenure for which you wish to invest regularly, and interest rate and the calculator will yield you the expected returns. You can use the calculator by Kotak Life to try different set of values to see the optimum investment sum and tenure for your financial goals. Try Kotak Life RD calculator now-


With the assurance of guaranteed returns, competitive interest rates, and the convenience of flexible investment terms, RDs emerge as essential tools for financial security. Whether embarking on the journey of savings or seeking new tools for disciplined investments, RDs offer a reliable option for growth in the ever-evolving field of personal finance.

FAQs on Recurring Deposit?


What is RD and how does it work?

RD (Recurring Deposit) is a savings option where a fixed amount is deposited regularly over a predetermined period. Interest is accrued on these deposits.


Which is better RD or FD?

RD and FD (Fixed Deposit) cater to different needs; RD allows regular savings with flexibility, while FD offers higher interest rates for lump-sum investments. The choice depends on individual financial goals.


Is interest earned on recurring deposits taxable?

Yes, interest earned on recurring deposits is taxable as per the individual’s income tax slab.


What is the minimum tenure for Recurring deposits?

The minimum tenure for recurring deposits varies among banks but generally ranges from 6 months to 10 years.


Who is eligible to open a Recurring Deposit (RD) account?

Anyone with valid identity proof and a source of income, including individuals, minors (with a guardian), and senior citizens, can open a Recurring Deposit account.


Can I withdraw my Recurring Deposit before the term is over?

Yes, you can withdraw your Recurring Deposit before the term ends, but banks may impose penalties or adjust the interest rates accordingly.


How can banks figure out the maturity amount?

Banks calculate the maturity amount of a recurring deposit using a formula that considers the principal amount, interest rate, and tenure, typically using compound interest calculations.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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