The interest rate offered by banks on RDs is determined by factors such as the category you fall into and the tenure you select. Compared to regular citizens, most banks offer senior citizens a higher interest rate. Banks offer a variety of RD schemes to their customers. In addition to the regular schemes, special schemes are available to assist you in reaching your objectives. Banks offer revolving deposit interest rates ranging from 4.00 per cent to 6.50 per cent p.a. (1 year to 5 years and above) to the general public. Banks offer senior citizens a higher rate of interest when they open an RD account. In this article, we will understand everything you need to know about recurring deposits and RD interest rates.
- Types of RD Account Interest Rates
- Features of RD Interest Rates
- RD Interest Rates Offered by Banks
- How to Calculate the Interest on Your Recurring Deposit
- Taxation Rules on RD Interest Rates
- Benefits of Recurring Deposit Interest Rates
Types of RD Account Interest Rates
Regular RD Accounts: A standard RD account is intended for Indian residents who are 18 years of age or older. The account allows account holders to deposit a fixed sum into the account once a month for a set period of time in order to earn a fixed interest rate on the deposit amount. Interest will be calculated using a compound or straightforward interest method based on the account’s tenure.
RD Accounts for Minors: These accounts will be opened in the names of individuals under the age of 18. However, this is only possible with the supervision of their parents or guardians. A fixed monthly instalment and tenure will be set at the time the account is opened, just like with regular RD accounts. When compared to regular RD accounts, the returns may be comparable or slightly higher.
RD Accounts for Senior Citizens: Banks offer dedicated RD accounts for senior citizens, defined as those over the age of 60. When compared to regular customers, senior citizens may receive a higher level of interest in RD. Every quarter, the interest is compounded.
NRE/NRO RD Accounts: Non-Resident Indians (NRIs) can open NRE and NRO RD accounts. NRIs can earn a reasonable interest rate and save money every month on income earned both outside and inside India through such accounts.
Features of RD Interest Rates
- An RD account can be opened with a monthly investment of INR 100 at least
- The minimum deposit tenure for RD accounts is six months, and the maximum deposit tenure is ten years.
- RD accounts pay a higher interest rate than savings accounts.
- RD and FD interest rates are not the same. The FD interest rates range from 1.75% to 6.85, and the RD interest rate ranges from 2.50% to 6.80%.
- Banks typically compound interest once every quarter.
- RD accounts have a lock-in period of 30 days to 3 months, depending on the bank. Withdrawal during the lock-in period will result in no interest.
- A single account holder may have an unlimited number of RD accounts.
- A few banks and the Post Office accept advance deposits.
- Partially withdrawn funds are not permitted.
- Premature withdrawals are permitted with a penalty.
- Make monthly payments rather than lump-sum payments, as with fixed deposits.
- Set up standing orders to automatically deduct instalments from your savings account without any manual intervention.
- Seniors may be eligible for an additional 0.5 per cent interest rate.
- Minors can open RD accounts in their names, but only with the permission of their parents/guardians.
- On the RD balance, overdraft or loan facilities are available.
Did You Know?
TDS will not be deducted if the interest earned on the RD account is less than Rs.10,000.
RD Interest Rates Offered by Banks
The interest rates offered to the general public by various banks operating in the country that allows you to open a recurring deposit account with them are listed below. The rates have been divided into different investment periods. Scroll down to get an idea of the rates available.
|Bank||Normal Citizens||Senior Citizens|
|State Bank of India||6.50% – 6.95%||7% – 7.45%|
|HDFC Bank||5.75% – 6.90%||6.25% – 7.40%|
|Kotak Mahindra Bank||6.25% – 6.75%||6.75% – 7.25%|
|Axis Bank||6.50% – 7%||7% – 7.50%|
|IDFC Bank||6.75% – 7.25%||0%|
|ICICI Bank||6.25% – 7.10%||6.75% – 7.60%|
|IDBI Bank||7% – 7.15%||7.50% – 7.65%|
|Indian Bank||5.25% – 6.50%||5.75% – 7%|
|PNB Bank||6.70% – 7%||7.20% – 7.50%|
|Andhra Bank||6.25% – 7%||6.75% – 7.50%|
|Bank of Baroda||6.50% – 7%||6.50% – 7%|
|Central Bank||7% – 7.15%||7.50% – 7.65%|
|Canara Bank||7% – 7.35%||7.50% – 7.85%|
|Allahabad Bank||6.50% – 7%||0%|
|Bank of India||6.75% – 7%||7.25% – 7.50%|
|Corporation Bank||7% – 7.10%||7.50% – 7.60%|
|Syndicate Bank||6% – 6.80%||6.50% – 7.30%|
|RBL Bank||7% – 7.85%||7.50% – 8.35%|
|Union Bank of India||7% – 7.25%||7.50% – 7.75%|
How to Calculate the Interest on Your Recurring Deposit?
The recurring deposit amount is calculated using the RD deposit interest rate or the RD interest calculation formula. Various factors, such as the amount invested, the length of tenure, and so on, are considered.
The formula for calculating RD is as follows:
M = R [(1+i) n – 1]/ 1 – (1+i) -1/3
In the formula,
‘M’ stands for maturity value.
The letter ‘R’ stands for monthly instalment.
‘n’ denotes the number of quarters.
I stand for interest rate/400.
Taxation Rules on RD Interest Rate
If you want to invest lesser amounts every month rather than a hefty sum all at once, recurring deposits are the way to go. Recurring deposits are term deposits that allow you to deposit a set amount of money every month for a set period of time, earning you the best rd rates comparable to fixed deposits.
A recurring deposit, if not the best, is one of the best investment options for first-time investors who want to keep their cash in a safe investment. A recurring deposit can be opened with any bank and is not subject to market risk. Any amount of money can be deposited each month, and banks assign an annual interest rate that is accrued and paid to the account holder on a quarterly or semi-annual basis.
To open a recurring deposit account with any bank, you must first have a savings account with the bank that offers the recurring deposit scheme you want. You can deposit the funds in your savings account, which will be deducted by the bank and transferred to the recurring deposit account on a monthly basis.
|TDS deducted on interest earned on the recurring deposit||10% (only if the earned interest is more than Rs.10,000)|
|TDS deducted for the failure of providing PAN||20%|
|Forms to be submitted if income falls under the non-taxable income||Form 15G|
Each year, the money invested in a recurring deposit is counted as part of the investor’s yearly income. The interest that you earn on your recurring deposit is subject to a 10% TDS (Tax Deducted at Source). TDS is not deducted if the interest on your recurring deposit is less than Rs.10,000. If you fail to provide the bank with your PAN, the TDS will be 20%.
Even if their income falls within the non-taxable income bracket, they must still file Form 15G to be taxed on both fixed and recurring deposits.
Benefits of Recurring Deposit Interest Rates
- Earn while you save: Starting with your first contribution, your deposit will earn interest. The accumulated interest will grow over the course of your tenure. The longer you invest, the higher the interest rate you will receive.
- Safe Investment: Recurring deposits are safe because they have no or negligible risk. Choose a reliable or stable and a secure bank to ensure the safety of your funds. Recurring deposits are simply an investment of your money that does not involve any market risk. As a result, the interest rate will not fluctuate, and you will not lose any money.
- Payout in a lump sum: You will receive a cash payment in a lump sum at the end of your RD tenure. This figure includes your contribution as well as any interest earned. You can reinvest the money or spend it on whatever for which you are saving.
- Online access: Most banks provide Internet Banking services that allow you to open deposits, access your accounts, and track the status of your deposit. You can also look at the various interest rates available. You can choose the best tenure and deposit amount for you while also earning the highest interest rate available.
- Loan offers: If you have an RD with a bank, you may occasionally receive pre-approved loan offers. In any other cases, your loan applications will be prioritized, and your processing time may be shortened. In addition, banks provide loans with low-interest rates.
Words to Remember
- There is no penalty applied if you miss a month in RD.
- Begin with a monthly budget of at least Rs 2000.
- You can save for as little as six months.
- The documents needed to open a recurring deposit account are simple to gather.
Small Finance Banks in the country offer high-interest rates on recurring deposits and fixed deposits. A recurring deposit account can be opened for a period of 6 months to 10 years. Some small finance banks have a one-year minimum tenure. Small Finance Banks provide low-interest rates on long-term RD. Small finance banks are currently offering interest rates on recurring deposits that can reach 8%. This interest rate is available from Utkarsh Small Finance Bank on a 36-month recurring deposit.
If you are one of the following, you can open an RD account with any bank in India: A HUF or an Indian resident (Hindu Undivided Families). A non-resident Indian (NRI) (through NRO and NRE accounts). A minor formalized paraphrase (under the guardianship of parents).
You have the option of closing your RD account and using the proceeds for personal purposes. Alternatively, you can instruct your bank to transfer the funds to an FD account, where they will earn higher dividends.
The minimum term for opening a bank RD account with Axis Bank is six months, and the maximum term is ten years.
The minimum monthly installment for an Axis Bank recurring deposit is Rs 500, and the maximum can be multiples of that amount with no upper limit.