Glossary
Recurring deposit (RD)
A fixed monthly deposit with a bank for a defined tenure, at a contracted rate.
Definition
A recurring deposit (RD) is a bank product that lets a saver deposit a fixed amount every month for a contracted tenure (typically 6 months to 10 years) at a guaranteed interest rate. Unlike a SIP, the rate is fixed and the returns are not market-linked — making RDs predictable but lower-yielding over long horizons.
Key points
- RD rates in India typically range 5.5–7.5 %, depending on bank and tenure.
- Interest is taxed as ordinary income (added to your slab) — no LTCG benefit.
- Early withdrawal incurs a penalty (rate cut of 0.5–1 %).
- RDs suit short-term goals; SIPs suit long-term equity goals.
Related
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