What is Recurring Deposit?

Posted on Friday, April 25th, 2025 | By IndusInd Bank

India is a country with a diverse financial landscape. This is because there are numerous investment tools available for people. The tool that we will focus on today is a recurring deposit (RD).

But what is recurring deposit? Simply put, RDs are an amazing chance for people that are looking to save money in a disciplined way. They are a simple and reliable investment option. For this reason, it is the preferred choice for many investors. This article will delve into the meaning of an RD and the advantages it offers.

Understanding Recurring Deposits

A recurring deposit is a type of term deposit. This means it involves depositing money into an account for a set duration over regular intervals. Most banks and financial institutions in the country offer RDs. The aim of recurring deposits is to help individuals develop a habit of saving while offering interest at a rate that is like fixed deposit. This tool is especially important for salaried individuals who want to save a large amount over time.

How Does an RD Account Work?

Once you open a recurring deposit account, you have to deposit a set amount of money every month into it. You need to do this until the maturity of the RD. Once your RD matures, the bank you have invested your money with returns the total amount you paid along with the interest accrued over the tenure of the RD. The rate of interest for recurring deposits is often similar to that of fixed deposits. However, it can differ based on which bank you choose to invest with.

Advantages of Recurring Deposits in the Indian Banking Sector

Recurring Deposits (RDs) are one of the most popular investment options in India. They offer a disciplined savings approach, guaranteed returns, and minimal risk. Banks and post offices provide RDs with flexible tenures and competitive interest rates, making them ideal for salaried individuals, students, and small investors. Here are the key advantages of investing in a recurring deposit in India:

1. Assured Returns

RDs offer fixed and guaranteed returns, making them a safe investment choice. Unlike market-linked instruments, they are not affected by economic fluctuations. Banks provide predetermined interest rates, ensuring that depositors receive a lump sum at maturity.

2. Low Risk and Security

Banks in India operate under the regulations of the Reserve Bank of India (RBI), ensuring deposit security. The Deposit Insurance and Credit Guarantee Corporation (DICGC) insures bank deposits up to ₹5 lakh, adding an extra layer of safety.

3. Affordable and Disciplined Savings

RDs allow individuals to start with small monthly deposits, typically starting at ₹100. This feature makes it accessible to people across income levels. Regular investments cultivate disciplined saving habits, helping individuals build financial stability.

4. Flexible Tenure Options

Banks offer RD schemes with tenures ranging from six months to ten years. Depositors can choose a tenure based on their financial goals, whether short-term or long-term. This flexibility makes RDs suitable for various financial planning needs.

5. Attractive Interest Rates

Banks provide competitive interest rates on RDs, often higher than savings accounts. Senior citizens receive additional interest benefits, typically 0.5% more than standard rates. Interest rates vary across banks but remain consistent and predictable.

6. Loan Facility Against RD

Many banks allow depositors to avail of loans against their RD balances. Borrowers can access up to 80-90% of their RD value at competitive interest rates. This feature helps individuals meet urgent financial needs without breaking their savings.

7. Easy Online Management

Most banks provide online RD services, enabling customers to open, manage, and track their deposits digitally. This convenience saves time and ensures hassle-free transactions.

8. No Market Volatility Impact

Unlike mutual funds or stocks, RDs remain unaffected by market fluctuations. Investors seeking stable and risk-free returns prefer RDs for their predictability.

Recurring deposits offer a perfect balance of security, affordability, and steady returns. They serve as an excellent financial tool for individuals looking to build wealth over time without exposing themselves to market risks.

If you prefer making a lump sum investment, you can opt for investments in fixed deposits. In addition to the peace of mind that a lump sum investment offers, investing in FD employs the power of compounding. This means the returns you earn will be higher. IndusInd Bank offers fixed deposits with the following features:

• Competitive Rates: With attractive FD interest rates around 7.75% p.a., IndusInd Bank ensures your investment is a fruitful one. You can use a fixed deposit calculator to estimate your returns. 
• Flexible Amount and Tenures: IndusInd Bank allows you to invest as low as ₹10,000 for a tenure anywhere between 7 days and 10 years.
• Auto Renewal: With IndusInd Bank, you can enjoy facilities like automatic renewal for your fixed deposit investment and to reinvest your earnings into another FD.

Also Read: Risk and returns: A Comparative Analysis of FDs and RDs

Conclusion

Recurring deposits and fixed deposits are both amazing investment tools. Both of them can help you inculcate saving disciple and meet long-term financial goals. However, which one you should go for depends on you. It is based on the overall financial situation you are in, your maturity preferences, and your expectations for growth.

While a recurring deposit is great for building a corpus from scratch, an upfront lumpsum investment in fixed deposits can be lucrative. You can head on to the IndusInd Bank website and use the fixed deposit calculator to know how much you should invest and estimate your returns.

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.