Banking · Monthly savings

Recurring Deposits (RD)

Recurring Deposit = small fixed monthly contribution (₹500-50K) at FD-like interest rates (typically 6.5-7.5% for general, 7.0-8.0% for seniors). Best forced-savings tool for first-time savers, students, and anyone with steady cashflow building toward a 1-3 year goal. Lower returns than equity SIP, but zero volatility + DICGC ₹5L cover. Post Apr-2023, RD interest is fully taxable at slab rate.

Who needs this

First-time savers building emergency fund. Parents saving for children's milestones (school admission, marriage). Anyone with predictable income wanting forced savings. Skip if you have 7+ year horizon — equity SIP wins meaningfully. RD shines in 1-3 year goal-saving.

Key decisions

Q1
RD or SIP for monthly savings?
RD wins: 1-3 year goal, zero volatility need, capital safety paramount. SIP wins: 5+ year goal, higher returns, you can stomach 20-30% drawdown. Most people: ₹2-3K RD for emergency fund + ₹5-10K SIP for long-term wealth. Don't pick one or the other.
Q2
Bank RD vs Post Office RD?
Bank RD: 6.5-8.0% (varies by bank), 6 months to 10 years tenure, monthly compounding. Post Office RD: 6.7% (Q4 FY26 rate), only 5-year tenure, quarterly compounding. PO RD has government backing (no DICGC needed) but rate is reset quarterly by govt.
Q3
What if I miss a payment?
Most banks: ₹1-2 penalty per ₹100 of installment after 4 missed payments. Account closed if 6+ consecutive misses. Set auto-debit to avoid. Post office: ₹1 per ₹100 penalty + revival within 4 missed installments.
Q4
Tax on RD interest?
Interest fully taxable at slab rate. Bank deducts TDS at 10% if interest > ₹40K/year (₹50K for seniors) under Sec 194A. Submit Form 15G/15H to skip TDS if income below taxable limit. Add interest to ITR regardless.

Top picks

Source: bank disclosures + RBI rate notifications · refreshed monthly

SBI RD
Wide branch network, ₹100 minimum, 1-10 year tenures. Public-sector trust.
7.00%
p.a.
HDFC RD
Online opening, ₹1,000 minimum, premature-closure penalty 1%.
7.10%
p.a.
ICICI iWish RD
Goal-linked RD app, flexible monthly amount, online-only.
7.10%
p.a.
Post Office RD
5-year fixed tenure, govt-backed, ₹100 minimum.
6.70%
p.a.
AU Small Finance Bank RD
Highest RD rate among scheduled banks. DICGC ₹5L cover.
7.50%
p.a.

RBI rules + scheme specifics

DICGC ₹5L deposit insurance applies to bank RDs (not post office — that's govt-backed).
TDS u/s 194A: 10% on bank RD interest > ₹40K/year (₹50K for seniors).
Form 15G/15H eligibility: total annual income below taxable threshold.
Premature closure: most banks penalize 0.5-1% on prevailing FD rate.
Senior-citizen RDs: 0.50% extra rate at most banks (over base RD rate).
RBI floor: minimum 6-month tenure for bank RDs.