Recurring Deposit (RD) Scheme is one such savings scheme which is very much preferred by people willing to deposit a regular amount to earn some good returns. In contrast to Fixed Deposit Scheme, under Recurring Deposit Scheme, one can make a corpus by making a regular deposit of the same amount each month.
The rate of interest provided by the bank has an important role to play in calculating the maturity amount. For a deposit that is made over Rs 2 lakhs, it might be beneficial to see what the highest interest rate is being offered by the banks.
What Is a Recurring Deposit?
A Recurring Deposit (RD) is a type of term deposit in which a fixed amount is deposited by the customer every month for a particular period. Interest is calculated by the bank according to the applicable RD rate. In most cases, the money along with the interest is paid at the end of the tenure.
Recurring Deposits may be helpful in achieving financial objectives. They provide customers with a good opportunity to save money regularly with relatively assured returns.
Which Banks Offer Competitive RD Interest Rates?
Several public and private sector banks offer RDs across different tenures. The applicable rate can differ depending on the duration selected and whether the depositor is a regular customer or senior citizen.
| Bank category | Typical RD features | What to compare |
| Large private banks | Multiple tenure options and digital account opening | Tenure specific interest rates and premature withdrawal terms |
| Public sector banks | Established banking network and varied deposit schemes | Applicable rates, minimum instalment and flexibility |
| Small finance banks | Often competitive rates for selected tenures | Deposit insurance, applicable conditions and rate tenure |
| Other scheduled banks | Different RD products for retail customers | Rate, tenure and withdrawal conditions |
Rather than selecting a bank solely because it advertises a high rate, compare the rate applicable to your preferred tenure. You can consider opening a recurring deposit with DBS Bank offering interest rates up to 6.25% for tenures of 5 years and above.
Does a Deposit Above Rs 2 Lakh Earn a Higher RD Rate?
Not necessarily. RD interest rates are generally linked to the tenure and applicable deposit category rather than simply the total amount deposited. Therefore, putting more than Rs 2 lakh into an RD does not automatically mean that you will receive a higher interest rate.
For example, two customers could choose different monthly instalments but receive the same rate if they select the same tenure and fall under the same customer category.
This makes it important to check the bank’s current rate card before opening an RD.
Factors to Consider When Comparing RD Rates
Interest rate is important, but it should not be the only consideration. Look at the following factors:
- Tenure
RD rates can vary across tenures. Banks may offer competitive rates for specific periods. Choose the tenure based on your financial objective rather than selecting a period solely because it offers a higher rate.
- Maturity Value
Use the bank’s RD calculator to estimate how much your regular contributions could grow by maturity. This helps you compare different banks and tenures based on the expected maturity amount.
- Senior Citizen Rates
Many banks provide an additional interest rate to senior citizens, subject to their applicable terms. If you qualify, compare the senior citizen rate separately from the standard customer rate.
- Premature Withdrawal
Financial requirements can change during the RD tenure. Check whether premature closure is permitted, whether a penalty applies and how the interest is calculated if you withdraw before maturity.
- Minimum Instalment
Banks can have different minimum monthly deposit requirements. Choose an amount that fits comfortably within your monthly budget so that contributions can be maintained throughout the tenure.
- Savings Account Interest Rates
It is also useful to compare savings account interest rates when deciding how to manage funds outside your RD. A savings account can provide easier access to money, while an RD is designed for regular contributions over a predetermined period. Maintaining both can help balance liquidity with disciplined savings.
How Is RD Interest Calculated?
RD interest is generally calculated based on the instalments deposited during the tenure and the applicable interest rate. Since each instalment remains invested for a different period, the calculation differs from a lump sum fixed deposit.
For a more accurate estimate, investors can use an RD calculator by entering the monthly instalment, interest rate and tenure. The tool can provide an estimated maturity value and help compare different savings options.
Should You Choose the Highest RD Interest Rate?
The highest rate is not automatically the best choice. Consider the bank’s credibility, tenure, withdrawal conditions, service features and maturity amount alongside the advertised rate.
If you also need an account for day-to-day banking and easy access to funds, choosing the best online savings account can complement your RD. A savings account can provide liquidity for short term needs, while the RD can help build savings towards a planned financial goal.
Conclusion
Before opening an RD, compare the applicable interest rate, maturity value, tenure, premature withdrawal rules and minimum instalment requirements. Reviewing these factors together can help you select an RD that aligns with your savings objective while maintaining a balance between predictable returns and financial flexibility. With DBS Bank you can open a recurring deposit easily through the DBS Digibank app and choose a tenure which suits your goals.
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