RD

Full form: Recurring Deposit

Savings & Deposits

A Recurring Deposit is a monthly savings scheme where a fixed amount is deposited every month for a predetermined period. Similar to FD but for regular monthly savers. Returns are slightly lower than FD as each monthly deposit has a shorter tenure.

In detail

RD vs SIP comparison: RD is capital-protected with guaranteed returns (6.5-7.5%). SIP in equity mutual funds has market risk but historically higher returns (12-15% over 10+ years). RD is appropriate for short-term (1-3 year) goals where capital protection matters.

Formula

RD maturity = P x [(1 + r/4)^(4n) - 1] / (1 - (1 + r/4)^(-1/3))nApproximate: Rs 5,000/month x 5 years at 7% = approximately Rs 3.58L (invested Rs 3L)

Real-life example

🇮🇳 India example

Preeti opens a Rs 10,000/month RD for 2 years at 7% quarterly compounding. Total deposits: Rs 2.4L. Maturity value: approximately Rs 2.57L. Gain: Rs 17,000 guaranteed. She uses this for her annual family vacation fund.

Frequently asked questions

RD vs SIP in liquid fund -- which is better? ▼

Liquid fund SIP: better returns (7-7.5%), same liquidity, no penalty for missing a month. RD: guaranteed rate, automatic discipline via standing instruction. For amounts above Rs 5L total: liquid fund wins clearly.