The interest rate remains constant for the entire tenure of the recurring deposit, as set by the bank during account opening. For instance, if the interest rate is 7% at the time of account initiation, it will remain fixed for your account until the account is closed or the tenure is completed. As the recurring deposit is supported by the government's deposit insurance schemes, it serves as a safe and attractive option for individuals who wish to save money regularly and earn a fixed return on their savings without assuming significant risk.
Let's consider the example of Ms. Narayan who wants to save
money for a vacation that he plans to take in 2 years. He decides to open a
recurring deposit account with her bank.
Details of Ms. Narayan's Recurring Deposit:
Monthly Deposit Amount: INR 5,000
Duration: 2 years
Interest Rate: 7% per annum
Based on these details, here's how Ms. Narayan's recurring
deposit would work:
Monthly Deposit Amount: INR 5,000
Duration: 2 years
Interest Rate: 7% per annum
Each month, Ms. Narayan deposits INR 5,000 into her
recurring deposit account. The compounded interest on a quarterly basis.
Interest Calculation: The interest for each quarter can be
calculated using the formula: (Monthly Deposit Amount × Number of Months in the
Quarter × Interest Rate × 3 months / 12).
First Quarter Interest: (5,000 × 3 × 0.07 × 3 / 12) = INR
262.50
Second Quarter Interest: (5,000 × 3 × 0.07 × 3 / 12) = INR
262.50
...and so on for each quarter.
Maturity Amount: The total amount Ms. Narayan will receive
at the end of the 2-year term will be the sum of all the deposits and the
accrued interest.
Maturity Amount = Total Deposits + Total Interest Earned
Maturity Amount = 5000
+ (262.50 × 4 quarters) = INR 15787.50 for 1st year
...and so on for each
year.
At the end of the 2-year tenure, Ms. Narayan will receive
INR 129,154, which includes the total deposits of INR 120,000 and the interest
earned over the 2-year period.
For further calculations use finlifesecure calculator.
Some key features of Recurring deposits:
Deposit Amount: The investor chooses a fixed amount of money to deposit on a monthly basis, quarterly and yearly basis. This amount can be Rs. 100 to 1 Lac.
Tenure: The investor
selects the duration of their recurring deposits. It can be 6 months to 10
years.
Interest Rate: Interest
rates are vary according to the financial institution or banks and tenure. The interest rate remains fixed for the
entire tenure of the RD.
Maturity: At
the end of the RD tenure, the investor receives the principal amount (the total
of all monthly deposits) along with the interest earned during the tenure.
Premature Withdrawal: Most of the banks allow the premature withdrawal in case any
emergency, banks can be charge penalty on the premature withdrawal.
Following are the Interest Rates of Banks :
|
Name of Banks |
1
year |
2
years |
3
years |
4
years |
5
years |
|
BOB |
5.30% |
5.45% |
5.50% |
5.50% |
5.50% |
|
BOI |
5.30% |
5.40% |
5.35% |
5.35% |
5.35% |
|
Central Bank of India |
5.45% |
5.50% |
5.50% |
5.50% |
5.60% |
|
SBI |
5.45% |
5.50% |
6.10% |
6.10% |
6.10% |
|
Axis Bank |
5.50% |
6.50% |
6.50% |
6.50% |
6.50% |
|
Canara Bank |
5.50% |
5.60% |
5.75% |
5.75% |
5.75% |
|
Oriental Bank of Commerce
|
5.50% |
5.50% |
5.60% |
5.75% |
5.75% |
|
Saraswat Bank |
5.50% |
6.25% |
6.40% |
6.25% |
6.25% |
|
Syndicate Bank |
5.50% |
5.60% |
5.75% |
5.75% |
5.75% |
|
United Bank |
5.50% |
5.50% |
5.60% |
5.75% |
5.75% |
|
Dhanlaxmi Bank |
5.60% |
5.60% |
6.00% |
6.10% |
6.10% |
|
Federal Bank |
5.60% |
5.75% |
6.00% |
6.00% |
6.00% |
|
Indian Overseas Bank |
5.70% |
5.70% |
5.85% |
5.85% |
5.85% |
|
UCO Bank |
5.75% |
5.75% |
5.60% |
5.60% |
5.60% |
|
BOM |
6.00% |
6.00% |
6.00% |
5.75% |
5.75% |
|
DBS Bank |
6.00% |
6.50% |
6.25% |
6.25% |
6.25% |
|
Allahabad Bank |
6.10% |
6.30% |
6.50% |
6.40% |
6.40% |
|
HDFC Bank |
6.10% |
6.50% |
6.50% |
6.50% |
6.50% |
|
ICICI Bank |
6.10% |
6.40% |
6.50% |
6.60% |
6.60% |
|
Indian Bank |
6.10% |
6.50% |
6.40% |
6.40% |
6.40% |
|
Bandhan Bank |
6.25% |
6.25% |
6.25% |
6.25% |
6.25% |
|
IDBI Bank |
6.25% |
6.25% |
6.25% |
6.10% |
6.10% |
|
Kotak Mahindra |
6.25% |
6.40% |
6.30% |
6.25% |
6.20% |
|
IndusInd Bank |
6.25% |
7.00% |
6.75% |
6.75% |
6.75% |
|
PNB |
6.30% |
6.30% |
6.25% |
6.10% |
6.10% |
|
Union Bank |
6.30% |
6.60% |
6.70% |
6.70% |
6.70% |
|
J&K Bank |
6.35% |
6.25% |
6.10% |
6.10% |
6.10% |
|
Karnataka Bank |
6.40% |
6.40% |
5.75% |
5.75% |
5.75% |
|
South Indian Bank |
6.40% |
6.40% |
5.90% |
5.90% |
6.00% |
|
Karur Vysya Bank |
6.50% |
6.50% |
7.00% |
6.25% |
6.25% |
|
Yes Bank |
6.50% |
6.75% |
6.75% |
6.75% |
6.75% |
