Recurring Deposits: A Beginner’s Guide to Disciplined Monthly Saving

A Recurring Deposit (RD) is one of India’s most straightforward savings instruments – you deposit a fixed amount every month for a predetermined tenure, and the bank pays compound interest on your contributions. It is the ideal tool for people who want to build disciplined savings habits without navigating the complexity of mutual funds.

How RDs Work

You commit to depositing a fixed amount (minimum ₹100 at most banks) monthly. The bank compounds the interest quarterly (in most cases). At the end of the tenure, you receive the total deposited amount plus the compounded interest.

Current RD Rates (2026)

• SBI: 6.5% (1-year), 6.8% (3-year)
• HDFC Bank: 7.0% (1-year to 3-year)
• Post Office RD: 6.7% (5-year) – government-guaranteed
• Small Finance Banks: up to 7.8–8.0%
• Senior Citizens: +0.25% to +0.50% additional in most banks

RD vs SIP: Which is Better?

This is not an apples-to-apples comparison. RDs offer guaranteed returns with zero market risk – perfect for short-term goals or risk-averse savers. SIPs in equity mutual funds offer potentially higher returns but with market risk – suitable for long-term goals (5+ years). For most investors, the answer is: use RDs for near-term goals and SIPs for long-term wealth creation.