Recurring Deposit: Wealth With Smart Saving

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recurring deposit

Investing can often feel like a complicated puzzle with lots of options. One term you might hear a lot is ‘recurring deposit’, or RD for short. It’s a simple, effective way to save money, whether you’re just starting out or have been investing for years.

This article aims to provide you with the meaning of recurring deposits, their different types, eligibility criteria, and factors to consider before making decisions.

What Is a Recurring Deposit?

A recurring deposit, commonly known as an RD, is a specialized savings plan provided by financial institutions. It allows you to put in a certain amount of money on a monthly basis, and in return, you earn interest at the same rate as a fixed deposit. The duration of this investment is predetermined, usually falling between six months and a decade.

Key Takeaways

  • A recurring deposit (RD) is a simple and reliable savings plan that allows you to deposit a fixed amount monthly to earn interest.
  • Some recurring deposits offer flexibility, allowing you to deposit higher amounts when possible.
  • The term or length of the recurring deposit should align with your financial goals.
  • Recurring deposits are offered by various financial institutions, including banks and Non-Banking Financial Companies (NBFCs).

Features of Recurring Deposit 

A recurring deposit (RD) is a simple and reliable savings plan that allows you to deposit a fixed amount monthly to earn interest. Here are key features that make recurring deposits become popular:

1. Fixed Monthly Deposits

One of the primary features of recurring deposits is the fixed monthly deposit. You decide on a set amount to deposit each month, making it easier to budget and plan your savings.

2. Varied Interest Rates

Recurring deposit Interest rates can differ from one bank to another. It’s important to compare rates to ensure you’re getting the best deal.

3. Flexible Tenure

Recurring deposits offer a range of tenures, usually from six months to ten years. This flexibility allows you to align your RDs with your financial goals and needs.

4. Special Accounts for Specific Groups

There are specialized accounts for different demographics like senior citizens, minors, and Non-Resident Indians, each with its own set of benefits.

5. Tax Implications

While the interest earned on recurring deposits is generally taxable, some deposits offer tax benefits. It’s important to consult your bank to understand the tax implications fully.

6. Penalty for Late or Missed Payments

Banks usually have a penalty system for late or missed payments. Make sure you’re aware of these rules before opening an account.

7. Premature Withdrawal Rules

Understanding the rules surrounding premature withdrawal is essential. Some banks may charge a penalty for withdrawing your money before the term is up.

8. Option for Higher Deposits

Some recurring deposits offer the flexibility to deposit higher amounts whenever possible, making them suitable for those with fluctuating incomes.

9. Currency Options for NRIs

For Non-Resident Indians, some recurring deposit accounts allow deposits in foreign currencies, offering an additional layer of convenience.

10. Financial Discipline

One of the underrated features of recurring deposits is that they instil a sense of financial discipline by requiring regular monthly deposits.

11. Secure Investment

Recurring deposits are considered a low-risk investment, making them a safe option for those looking to grow their savings without taking on too much risk.

5 Types of Recurring Deposits

There are five main types of recurring deposits, as follows:

1. The Regular Recurring Deposit Account

This is a straightforward and adaptable way to save money, offered by most banks and also by Non-Banking Financial Companies (NBFCs) in India. If you’re 18 or older, you can open one of these accounts. 

You choose how much money you want to put in each month for a set period. The bank then pays you interest, which could be simple or compound, depending on their rules. While you can’t add extra money during the term, you can take out a big amount when it’s over.

2. Recurring Deposits Account for Senior Citizens

This account is made for senior citizens. Since seniors often have fewer ways to make money and more bills like healthcare, this account gives them an extra bonus. Many banks offer higher interest rates, usually 0.50% to 0.75% more than usual. So, it’s a good choice for seniors who want a safe way to grow their money.

3. Recurring Deposits Account for Minor Citizen

This account is suitable for minors in the recurring deposits category and allows individuals under 18 to start saving money, but they’ll need a parent or guardian to help open it. The goal is to get kids used to saving and being smart with money from a young age. 

Parents often use these accounts to put money aside for their child’s education. Thus, the interest rates are usually pretty good, often as high as or higher than what you’d get with a regular account.

4. Recurring Deposits Account for Non-Resident External (NRE)

This account is specially designed for people who live outside India but want to save money in Indian banks. It’s a great way to grow your savings without worrying about extra fees for currency exchange or money transfers. When the account matures, you can easily get your money.

5. Recurring Deposits Account for Tax-Saving

This account is like the regular one but helps you save on taxes for the interest you earn. However, you still have to pay some tax on the interest. The amount you pay, known as TDS, depends on how much you make every year. For example, if you earn between 5 and 10 lakhs a year, the bank might take about 10% of your interest as tax. It’s a good idea to talk to the bank to find the best option for your tax situation.

⚠️Tip: Remember to choose the account that suits your financial needs and your personality.

Eligibility Criteria for Recurring Deposit

When it comes to opening a recurring deposit (RD) account, banks, and financial institutions have set specific eligibility criteria to ensure a smooth and secure process. Below, we delve into the key eligibility factors that you should be aware of:

1. Ages

Age plays a significant role in recurring deposit eligibility. For a standard RD account, the minimum age requirement is usually 18 years. However, minors can also open an account under the supervision of a parent or guardian.

2. Citizenship Status

Your nationality can also influence your eligibility. For example, Non-Resident Indians (NRIs) have specialized accounts tailored to meet their unique financial needs when living abroad.

3. Income Source

While recurring deposits are generally open to all, some types of them may require proof of a stable income source. This is particularly true for senior citizens who might be offered higher incurring deposit interest rates based on their financial stability.

4. Tax Considerations

Certain recurring accounts offer tax benefits, but they come with their own set of rules. For example, the interest earned on some deposits is tax-deductible, but you’ll need to consult with the bank to understand the specifics.

5. Special Categories

There are also specialized recurring accounts for different groups like senior citizens, minors, and even tax-saving accounts. Each of these has its own eligibility criteria, often offering additional benefits to attract specific demographics.

6. Financial History

Your financial history, including your credit score, may be considered for certain types of recurring deposits. A good credit score can sometimes fetch you a better interest rate.

7. Account Tenure

The length of time you plan to keep the account also matters. Different banks offer varying tenures, usually ranging from six months to ten years, and the interest rates can differ based on the duration.

8. Consult Your Bank

It’s always advisable to consult with your bank to get a comprehensive understanding of the eligibility criteria. Banks often have unique policies and offers that can be beneficial based on your individual circumstances.

Factors to Consider Before Opening a Recurring Deposit (RD)

Before you start a recurring deposit, it’s important to think about a few things to make sure it fits well with your financial goals and current situation. Here are some main points to keep in mind:

1. Interest Rates

Different banks offer different interest rates. Since a higher rate means more money for you, it’s a good idea to do research for the best deal option.

2. Tenure

The length of time you plan to keep your money in the recurring accounts should match your financial goals. Short-term deposits usually have lower rates, but long-term ones can lock up your money. Pick a term that works for you.

3. Bank’s Reputation and Reliability

Make sure you choose a bank that’s reliable and has good customer service. This will help you to make sure that your money is safe.

4. Penalty on Delayed Payments

Know the bank’s rules about late or missed payments before you open an account. Make sure you can stick to making deposits every month.

⚠️Tip: Remember to commit to regular monthly deposits to avoid payment penalties or extra charges. 

5. Tax Implications

The interest you earn is usually taxed, so think about how this will affect your overall earnings. Sometimes, the bank will take out tax automatically.

6. Flexibility

Some banks allow you to put in more money when you can. This is good if your income changes from month to month.

⚠️Tip: Some recurring accounts offer flexibility, allowing you to deposit higher amounts when possible.


Recurring deposits are a reliable way to save money and see it grow over time. They’re a good fit whether you’re new to investing or have been at it for a while. Before you jump in, it’s important to get the full picture—how it works, their types, eligibility, and factors to consider. 


1. What is a recurring deposit?

A recurring deposit is a savings plan where you put a fixed amount of money into an account every month to earn interest over time.

2. What is a recurring deposit account?

A recurring deposit account is a specialized bank account where you deposit a set amount monthly and earn interest, usually at a rate similar to fixed deposits.

3. How do you calculate recurring deposit interest?

Recurring deposit interest is usually calculated using either simple or compound interest formulas, depending on the bank’s policy. You’ll need to know the interest rate, deposit amount, and tenure to calculate it.

4. Is a recurring deposit a good investment?

Yes, a recurring deposit is generally a safe and reliable investment option, especially for those who are new to investing or want a low-risk way to grow their savings.

5. Can you provide an example of a recurring deposit?

For example, you open a recurring deposit account with a $100 monthly deposit at a 5% annual interest rate for one year. At the end of the year, you’ll have deposited $1,200, and with interest, your total amount could be around $1,260, depending on the interest calculation method.

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Read more: Banking

By FinxpdX Team
By FinxpdX Team
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