Recurring Deposit

Learn about one of the safest and most-popular savings instruments in the market—recurring deposits. One of the most-preferred investment instruments, recurring deposits allow you to invest a fixed amount of money every month and earn interest on it.

With a recurring deposit scheme, you can accumulate funds to fulfil your short-term financial goals. Most banks in the country let you open an RD account. To be sure, you can also use a recurring deposit calculator to evaluate your maturity amount. Know more about recurring deposits and how to calculate its interest rate in this article.

Below are some of the characteristics of recurring deposits:

• The interest rates on recurring deposits are similar to those on fixed deposits.
• You can choose the duration of the deposit ranging from 3 months to 10 years.
• You do not have to deposit a large sum in recurring deposit schemes. You can choose an amount as little as INR 100.
• Senior persons are generally given a higher rate of interest as compared to the public.
• Even minors can create an RD account under their parents' supervision.
• You can make partial and premature withdrawals with recurring deposit schemes by paying specific additional fees.

The recurring deposit maturity amount you will get is dependent on four different variables: your monthly instalment, compounding frequency, recurring deposit interest rate and tenure. You can use a simple formula or the recurring deposit calculator to determine your maturity amount once your recurring deposit scheme matures. The interest generated from a recurring deposit account is compounded quarterly.

Using an RD calculator can help you easily arrive at your maturity amount. Several banks offer RD calculators on their websites for you to determine the amount you will receive. Below is the recurring deposit maturity formula showing how to calculate recurring deposit interest rates:

A=P*(1+R/N)^(Nt)

Where:

• A: Maturity amount
• P: Monthly recurring deposit instalment
• N: Number of quarters
• R: Recurring deposit interest rate in percentage
• t: Tenure

The RD calculator available online assigns the above variables to the standard formula to arrive at your exact maturity amount.

Below are some of the important factors that affect the recurring deposit rates:

1.Present economic environment: The RD interest rate is updated by the banks and other financial institutions as per the changes in the economic condition of the country like inflation, change in the repo rate by RBI, etc.

2.Age of the applicant: Banks and financial institutions offer a higher interest rate to the senior citizens in addition to the normal interest rate applicable on a recurring deposit scheme. The difference in interest rate is mostly 0.50% and can range up to 0.75%. However, note that the minimum age criteria for senior citizens can vary as per the recurring deposit scheme provider.

3.Tenure: One of the most important factors affecting the interest rate of RDs is tenure. It is basically the duration for which you keep your money invested in an RD scheme. Your RD rate of interest will vary as per the tenure option you choose.

It is easy to use a recurring deposit calculator to compute your RD scheme maturity amount. You can use the RD calculator offered by various banks and third-party websites to instantly determine the amount. You just need to provide some basic information like the amount invested, the tenure of your investment and the interest rate.

Below is the step-by-step process of how to use a recurring deposit calculator:

• Enter the amount you wish to deposit every month
• Enter the duration of your RD investment
• Enter the applicable interest rate. If you are using the recurring deposit calculator offered by your bank, then the interest rate may apply automatically
• After entering all the details, click enter and the result will be shown immediately

Advantages of using a recurring deposit calculator Below are some of the advantages of using a recurring deposit calculator:

• The recurring deposit calculator saves time and is convenient to use
• It gives you an accurate estimation of the maturity amount you will receive
• You can use the RD calculator to plan your finances for the long-term

Investing in recurring deposits is a wonderful option for you if you are looking for a safe investment option and don’t want to invest a lump-sum amount. You can use the RD calculator online with the above information to make the recurring deposit interest calculation.