By Niveshkarlo
August 10, 2026
A Recurring Deposit (RD) is a bank deposit where you invest a fixed amount at regular intervals, usually every month, for a predetermined period. Unlike a Fixed Deposit, where you deposit a lump sum upfront, an RD helps you build savings gradually.
The Process Is Simple 1. Choose your monthly deposit For example, ₹2,000 per month. 2. Select the tenure The bank offers different tenure options. 3. Deposit regularly Your chosen amount is deposited according to the RD schedule. 4. Earn interest The bank pays interest according to the applicable RD rate. 5. Receive the maturity amount Your deposits plus applicable interest are paid according to the account's terms.
Suppose You Save ₹2,000 Every Month Over 2 years, your total deposits would be: ₹2,000 × 24 months = ₹48,000 At maturity, you receive your deposits plus the interest earned, subject to the bank's applicable rate and calculation method.
✓ Builds saving discipline Regular deposits encourage consistent saving. ✓ Predictable structure You know your monthly commitment and tenure upfront. ✓ Suitable for planned goals It can be useful for short- or medium-term goals where you want regular saving rather than market-linked returns. ✓ Bank deposit protection Eligible recurring deposits with insured banks are covered by DICGC insurance, subject to the applicable ₹5 lakh limit per depositor per bank, including principal and interest.
Interest rate Compare the applicable RD rates offered by banks. Tenure Choose a period that matches your financial goal. Missed instalments Check the bank's rules and charges for delayed or missed deposits. Premature closure Understand the bank's rules and any applicable penalty or reduced interest before closing early. RBI directions permit banks to have policies on premature-withdrawal penalties, which must be disclosed to depositors. Tax on interest RD interest is taxable income; understand the applicable tax/TDS rules for your situation.
An RD can be useful if you want to: → Save a fixed amount regularly → Build discipline around saving → Work towards a defined financial goal → Avoid market-linked fluctuations for this portion of your savings But don't choose an RD based only on the headline interest rate.