Saving money is always a hassle that almost everyone faces today all over the world. In India too, there’s often a pressure to save money and invest in the right places either for buying a new property, saving for retirement or securing your child’s future.

With so many investment opportunities available out there, both safe as well as risky, it often gets confusing to choose the right option. However, whatever investment options you choose, you would need the capital to invest better. To build that capital, you need an effective savings plan other than your savings bank account.

Recurring Deposits (RD) scheme offered by banks is the best possible option to build such a capital gradually with time. The assurance of a better return, Recurring Deposit scheme is currently one of the most popular investment options for folks who earn a regular monthly income.

The Recurring Deposit scheme lets you regularly deposit a fixed amount every month for a specific term period pre-defined by the depositor under the guidelines of the respective bank. Such recurring deposit also earns an interest similar to Fixed Deposit at the end of the tenure on the deposited amount.

It is highly advisable to open a Recurring Deposit account instead of keeping the capital in the Saving Account as you will earn better interest rates on RD compared to any Savings Account.

Recurring Deposit Highlights:

  • You must choose a tenure for Recurring Deposit account in the multiple of 3 months.
  • Majority of Banks offer RDs for a tenure from as minimum as 6 months to a maximum of 10 years.
  • Once account is active, the depositor can’t change the amount of the installment or the number of the installments for their Recurring Deposits.
  • Interest on Recurring Deposit account is compounded every 3 months (i.e. Quarterly).
  • You can open a Recurring Deposit account for as low as Rs. 100 per month. However, a few banks have set higher monthly deposit limit.
  • A penalty will be levied for a delayed or missing installment.
  • Also, in any scenario, if you miss multiple installments, the RD may be closed and the amount will be returned to you.
  • The interest rates for Recurring Deposit is almost similar to Fixed Deposits at most Banks for similar tenures. However, banks like Bank of India offers 0.5% extra interest rate on RD than FD for same tenure.
  • In case of pre-mature withdrawal, the banks can charge a penalty as per the clauses similar to Fixed Deposits.
  • You can also get Loan/Overdraft against the amount available in Recurring Deposit at an interest rate which is generally 0.5% to 1% more than that offered for the RD account.

Recurring Deposit Interest Rates 2016:

Recurring Deposit interest rates vary according to the term duration of the RD account at each bank.

Below are highlights of Recurring Deposit interest rates in 2016 based on the term duration:

  • The Ratnakar Bank as well as Bandhan Bank offers the highest interest rate on RD for the duration of 1 year at 50%.
  • For the term duration of 2 years, The Ratnakar Bank offers an interest rate of 9%, while Bandhan Bank offers slightly lower interest rate at 8.50%.
  • The Ratnakar Bank also offers the best interest rate on RD for the term duration of 3 to 4 years at 75%.
  • For the term duration of 5+ Years Recurring Deposit account, the highest interest is offered by The Ratnakar Bank at the rate of 75%, whereas Tamilnad Mercantile Bank Ltd. offers an interest rate of 8.05%.

Best Recurring Deposit Interest Rates:

Name of the BankRD Term Duration
1 Years2 Years3 Years4 Years5 Years5+ Years
Allahabad Bank7.50%7.50%7.50%7.50%7.50%7.25%
Andhra Bank7.75%7.75%7.75%7.75%7.75%7.75%
Axis Bank7.90%7.75%7.75%7.75%7.75%7.50%
Bandhan Bank8.50%8.50%8.25%8.25%8.25%8.00%
Bank of Baroda7.30%7.30%7.30%7.30%7.30%7.30%
Bank of India7.30%7.30%7.30%7.30%7.30%7.25%
Bank of Maharashtra7.75%7.50%7.50%7.50%7.50%7.25%
Canara Bank7.75%7.75%7.75%7.75%7.75%7.50%
Catholic Syrian Bank7.60%7.60%7.60%7.60%7.60%7.60%
Central Bank of India7.75%7.75%7.50%7.50%7.50%7.50%
City Union Bank7.75%7.75%7.75%7.75%7.75%7.50%
Corporation Bank7.25%7.25%7.25%7.25%7.25%7.25%
DCB Bank7.90%8.15%8.20%8.20%8.20%8.00%
Dena Bank7.75%7.75%7.75%7.75%7.75%7.60%
Dhanalakshmi Bank7.60%7.60%7.60%7.50%7.50%7.50%
Federal Bank7.60%7.50%7.50%7.50%7.50%7.50%
HDFC Bank7.90%7.65%7.75%7.65%7.65%7.75%
ICICI Bank7.75%7.90%7.75%7.75%7.75%7.50%
IDBI Bank7.75%7.50%7.50%7.50%7.50%7.50%
IDFC Bank8.00%7.75%7.50%7.50%7.50%7.50%
Indian Bank7.25%7.25%7.25%7.25%7.25%7.25%
Indian Overseas Bank7.50%7.25%7.25%7.25%7.25%7.25%
Indus Ind Bank8.00%7.75%7.75%7.75%7.75%7.50%
J&K Bank8.00%8.00%8.00%8.00%8.00%7.75%
Karnataka Bank7.75%7.50%7.50%7.50%7.50%7.50%
Karur Vysya Bank7.75%7.75%7.75%7.75%7.75%7.75%
Kotak Mahindra Bank7.90%7.65%7.65%7.50%7.50%7.25%
Lakshmi Vilas Bank7.90%7.90%7.90%7.90%7.90%7.80%
Oriental Bank of Commerce7.75%7.50%7.50%7.50%7.50%7.50%
Post Office 5 Year RDNANANANA8.40%NA
Punjab and Sind Bank7.80%7.50%7.25%7.25%7.25%7.25%
Punjab National Bank7.50%7.25%7.25%7.25%7.25%7.25%
South Indian Bank7.70%7.60%7.60%7.50%7.50%7.50%
State Bank of Bikaner and Jaipur7.75%7.75%7.50%7.50%7.50%7.50%
State Bank of Hyderabad7.75%7.75%7.75%7.75%7.75%7.75%
State Bank of India7.25%7.50%7.00%7.00%7.00%7.00%
State Bank of Patiala7.77%7.52%7.52%7.52%7.42%7.42%
State Bank of Travancore7.00%7.50%7.25%7.25%7.25%7.00%
Syndicate Bank7.50%7.50%7.50%7.50%7.50%6.75%
Tamilnad Mercantile Bank Ltd7.95%7.95%7.95%7.95%7.95%8.05%
The Ratnakar Bank8.50%9.00%8.75%8.75%8.75%8.75%
UCO Bank7.75%7.75%7.75%7.50%7.50%7.50%
Union Bank of India7.65%7.55%7.55%7.50%7.50%7.25%
United Bank of India7.25%7.00%6.75%6.75%6.75%6.75%
Vijaya Bank7.75%7.50%7.50%7.50%7.50%7.50%
Yes Bank7.75%7.75%7.75%7.75%7.75%7.75%

Source: Official Bank Websites