Recurring Deposit
Definition
A savings scheme where you deposit a fixed amount every month for a predetermined tenure. At maturity, you receive the total deposits plus compound interest. Similar to FD but with monthly contributions instead of lump sum.
Why is Recurring Deposit Important?
In the context of wealth creation and investing in India, Recurring Deposit is a fundamental concept. Whether you are investing in mutual funds via SIPs, fixed deposits, or retirement schemes like PPF and NPS, this metric helps evaluate potential returns and risks. The power of compounding and market volatility make it essential to track this indicator for any long-term portfolio.
Investors are encouraged to use specific investment calculators to project the future value of their corpus. Understanding this term enables better asset allocation, inflation protection, and consistent progress toward your ultimate financial goals.
What is a Recurring Deposit?
A Recurring Deposit (RD) is a savings instrument where you deposit a fixed amount every month for a predetermined period and earn compound interest. It is like an SIP version of a Fixed Deposit — ideal for salaried individuals who want guaranteed, disciplined savings.
RD vs. FD vs. SIP
| Feature | RD | FD | SIP (Mutual Fund) |
|---|---|---|---|
| Investment type | Monthly fixed | Lump sum | Monthly flexible |
| Returns | Fixed (6-7%) | Fixed (6-7.5%) | Market-linked (10-15%) |
| Risk | Nearly zero | Nearly zero | Moderate to high |
| Tax | Fully taxable | Fully taxable | LTCG rules apply |
RD Maturity Calculation
Interest is compounded quarterly. For a ₹5,000/month RD at 7% for 3 years, the maturity value is approximately ₹2,02,230 (total deposit: ₹1,80,000 + interest: ₹22,230).