Guide
Recurring deposit maturity: how each monthly instalment earns for its own time
A recurring deposit is a savings habit with a guarantee. You commit to a fixed amount every month for a set period, the bank pays interest at a rate known in advance, and at the end you receive everything you deposited plus the interest. It suits people who cannot save a lump sum but can set aside the same amount each month. The page tells you what to expect at maturity and how much of it is interest.
How the interest is worked out
Unlike a fixed deposit, an RD has money going in all the time, so each instalment earns for a different period. The instalment made at the start of month k stays in for (N − k + 1) months, where N is the tenure. With quarterly compounding, which is common among Indian banks, its value at maturity is the instalment × (1 + r ÷ 4) raised to the power (months ÷ 3). The maturity value is the sum of all of these, which equals the standard formula M = R × ((1 + i)^n − 1) ÷ (1 − (1 + i)^(−1/3)) with i the quarterly rate and n the number of quarters.
A worked example
The default is 5,000 a month for 60 months at 6.5%, compounded quarterly. The maturity value is 3,54,954.10 against a total of 3,00,000 deposited, so 54,954.10 is interest, which is 15.5% of the final amount. The table shows how it builds: after one year you have deposited 60,000 and hold 62,143.23, an interest of 2,143.23; after two years 1,28,425.30; after three 1,99,121.86. The second sample, 10,000 a month for one year at 7%, matures at 1,24,621.32 with 4,621.32 of interest, only 3.7% of the final amount.
Why the interest share rises with time
In a short deposit most of the final amount is simply what you paid in. In a long one, the earliest instalments have years of compounding behind them, and the interest share climbs. That is why the five-year example’s interest is more than four times that of the one-year example in relative terms. The same logic explains why starting early with a smaller instalment often beats starting late with a larger one.
Quarterly or monthly compounding
The select box offers both. Monthly compounding gives a slightly higher maturity value at the same stated rate because interest is added more often. Use the interval your bank states in its terms; most RDs from Indian banks compound quarterly, while some post office schemes use their own conventions. If you are comparing two accounts, compare maturity values for the same instalment and tenure, not the headline rates.
Edge cases
The tenure must be a whole number of months, from 1 to 600, and the instalment and rate must be positive or zero. A rate of zero returns exactly what you deposited. The page assumes the first instalment is made at the start of month one and the last at the start of the final month, as banks usually do. If you deposit at the end of each month, the real result is a little lower than the one shown.
Limits
Banks may round the interest at every quarter, apply different rates for senior citizens or on early closure, or deduct tax at source when interest passes a yearly limit. The interest is taxable as income. For deposits of changing amounts, use the XIRR calculator to find the return from the dates and amounts.
Related tools
- FD Calculator values a single deposit made at the start instead of monthly instalments.
- SIP Calculator projects a market-linked monthly investment, which is not guaranteed.
- Sinking Fund Calculator finds the instalment needed for a goal.
- PPF Calculator shows a tax-free long-term account with yearly deposits.
Checked against the current version of the RD Calculator on .