{"id":11980,"date":"2026-04-22T17:28:41","date_gmt":"2026-04-22T17:28:41","guid":{"rendered":"https:\/\/srv1603485.hstgr.cloud\/rd-recurring-deposit-basics\/"},"modified":"2026-09-21T11:52:13","modified_gmt":"2026-09-21T11:52:13","slug":"rd-recurring-deposit-basics","status":"publish","type":"post","link":"https:\/\/www.billcut.com\/blogs\/rd-recurring-deposit-basics\/","title":{"rendered":"RD (Recurring Deposit) Basics"},"content":{"rendered":"

Recurring Deposit Interest Rate: How RD Returns Actually Work<\/h1>\n

By BillCut<\/strong>
Last updated: September 2026<\/p>\n

A recurring deposit interest rate is the rate a bank or the post office pays on a fixed sum you deposit every month for a set term. The Post Office 5-Year Recurring Deposit pays 6.7 per cent for the July to September 2026 quarter. Bank rates are set by each bank and change without notice.<\/p>\n

The rate is the easy part. What most pages leave out is that your money is not earning that rate for the full term, because each monthly instalment is only in the account for the months that follow it.<\/p>\n\n

What Is the Recurring Deposit Interest Rate Right Now?<\/h2>\n

There is exactly one recurring deposit rate in India that is published by the government, dated, and the same everywhere. The National Savings Institute rate table for small savings schemes<\/a> shows the 5 Year Recurring Deposit at 6.7 per cent for the July to September 2026 quarter, and at the same 6.7 per cent for the quarter before it.<\/p>\n

That rate is revised every quarter by the Ministry of Finance, so it is a number with an expiry date rather than a permanent one. It has sat at 6.7 per cent since the October to December 2023 quarter.<\/p>\n

Bank recurring deposit rates work differently. Under the Reserve Bank of India Interest Rate on Deposits Directions, 2016<\/a>, which treat recurring deposits as term deposits, every bank sets its own rates under a policy approved by its board. Those rates must be uniform across all branches and all customers, with no discrimination between two deposits of similar amount accepted on the same date.<\/p>\n

So there is no single bank recurring deposit interest rate to quote, and any page that gives you one is giving you a number that was true on the day it was written. What you can do is treat the post office rate as a benchmark and read your own bank\u2019s published rate card against it.<\/p>\n\n

Post Office Recurring Deposit or a Bank Recurring Deposit?<\/h3>\n\n
What you care about<\/th>Post Office 5-Year Recurring Deposit<\/th>Bank recurring deposit<\/th><\/tr>\n
Who sets the rate<\/td>The Ministry of Finance, revised every quarter<\/td>Each bank\u2019s own board<\/td><\/tr>\n
Rate you can look up<\/td>6.7 per cent for July to September 2026<\/td>Published on that bank\u2019s own rate card<\/td><\/tr>\n
Tenure<\/td>Fixed at 5 years<\/td>Set by the bank<\/td><\/tr>\n
Minimum monthly deposit<\/td>Rs 100, in multiples of Rs 10<\/td>Set by the bank<\/td><\/tr>\n
Closing early<\/td>Allowed after 3 years, at the Post Office savings rate as simple interest<\/td>Penalty must be disclosed when you open it, or it cannot be charged<\/td><\/tr>\n
Deposit insurance<\/td>Outside the bank deposit insurance scheme<\/td>Up to Rs 5 lakh per depositor per bank<\/td><\/tr>\n<\/table>\n

Neither column is the right answer for everyone. The post office version gives you a rate you can verify and a tenure you cannot shorten. A bank version gives you flexibility on both, and the rate may be higher or lower depending on the bank and the day. If you are weighing where a monthly habit should live, this comparison of digital and traditional saving methods<\/a> covers the wider choice.<\/p>\n\n

How Is a Recurring Deposit Interest Rate Applied to Your Money?<\/h2>\n

Interest on a recurring deposit is calculated on each instalment for the time that instalment actually stays in the account, and it is compounded quarterly. Your first deposit earns for the whole term. Your last deposit earns for one month.<\/p>\n

This is the single most misread thing about recurring deposits. A 6.7 per cent rate over five years does not mean your total deposits grow by 6.7 per cent a year. Only the earliest money gets anything close to the full run.<\/p>\n

The effect is easiest to see by working it out. It also explains why an online calculator\u2019s answer looks lower than people expect, and why stretching the tenure does more for the total than raising the monthly amount does.<\/p>\n\n

What Does Rs 5,000 a Month Actually Grow Into?<\/h2>\n

The figures below are illustrative. They use the Post Office rate of 6.7 per cent for the July to September 2026 quarter, compounded quarterly, and assume every instalment is paid on time.<\/p>\n\n
Line<\/th>Amount<\/th><\/tr>\n
Monthly deposit<\/td>Rs 5,000<\/td><\/tr>\n
Tenure<\/td>60 months<\/td><\/tr>\n
Total you deposit<\/td>Rs 3,00,000<\/td><\/tr>\n
Interest earned<\/td>Rs 56,829<\/td><\/tr>\n
Maturity value<\/td>Rs 3,56,829<\/td><\/tr>\n<\/table>\n

Rs 56,829 of interest on Rs 3,00,000 of deposits works out to about 19 per cent of what you put in, across five years. That is what 6.7 per cent looks like once you account for the fact that your later instalments barely had time to earn.<\/p>\n

Run the same rate over twelve months instead and the picture sharpens. Rs 5,000 a month for a year gives you Rs 62,210 at maturity, of which Rs 2,210 is interest. The rate has not changed. The time has.<\/p>\n

The practical reading is that a recurring deposit rewards duration more than size. If the choice is between Rs 10,000 a month for two years and Rs 5,000 a month for four, the second earns more interest on the same total, purely because the money sits longer.<\/p>\n\n

What Happens If You Close the Deposit Early?<\/h2>\n

You get your money, and you lose most of the reason you opened the account.<\/p>\n

A National Savings Recurring Deposit Account<\/a> matures in five years, takes a minimum of Rs 100 a month in multiples of Rs 10, and can be closed prematurely after three years. What you are paid on early closure is simple interest at the Post Office savings account rate, which the same rate table puts at 4.0 per cent for the July to September 2026 quarter.<\/p>\n

Put numbers on that. Rs 5,000 a month for 36 months is Rs 1,80,000 of deposits. Closed at the three year mark and paid 4.0 per cent simple, that is about Rs 1,91,100. Had the same 36 months been earning 6.7 per cent compounded quarterly, it would have been about Rs 1,99,746. Closing early costs roughly Rs 8,600 on those illustrative figures, and it is the rate change that does the damage rather than any fee.<\/p>\n

On the bank side, the rule is about disclosure. The Reserve Bank of India requires each bank to have a board approved policy on premature withdrawal penalties, and the components of that penalty must be brought to your notice when the deposit is accepted. If they were not, the penalty cannot be levied. That is worth knowing before you sign, not after.<\/p>\n

The broader point is that a recurring deposit is a commitment dressed up as a savings account. Products that try to soften that trade off, such as the auto renewing fixed deposits with flexible withdrawal limits<\/a> some banks have been testing, exist precisely because the lock in is the part people find hardest.<\/p>\n\n

Is the Interest Taxed, and Is the Money Insured?<\/h2>\n

Yes to both, and the thresholds matter more than most people assume.<\/p>\n

Interest on a recurring deposit is taxable. Tax is deducted at source by the bank only once the interest crosses a threshold. The Income Tax Department threshold limits for section 194A<\/a> set that at Rs 50,000 of interest paid or payable during the financial year by a banking company, and at Rs 1,00,000 where the recipient is a senior citizen. Those limits apply to time deposits and recurring deposits together.<\/p>\n

Two things follow. Tax deducted at source is not the same as the tax you owe, because the interest is added to your income and taxed at your slab regardless of whether anything was deducted. And the Rs 50,000 threshold is per bank, so spreading deposits across banks changes when deduction starts without changing what you owe.<\/p>\n

On safety, a recurring deposit at a bank is a covered deposit. The Deposit Insurance and Credit Guarantee Corporation states that it insures all deposits such as savings, fixed, current and recurring deposits<\/a>, up to Rs 5 lakh per depositor per bank for principal and interest together. The higher senior citizen threshold is one of several age linked differences worth checking alongside the senior citizen savings schemes available in India<\/a>.<\/p>\n\n

Does Putting Money in an RD Beat Clearing a Card Balance?<\/h2>\n

Not while the card balance is revolving, and the gap is not close. A recurring deposit paying 6.7 per cent a year is competing against a credit card charging around 3.5 per cent a month, which is a different order of magnitude.<\/p>\n

The figures below are illustrative and are not quoted from any lender. Assume Rs 5,000 a month spare for twelve months, a recurring deposit at 6.7 per cent, and an existing credit card balance of Rs 1,00,000 at 3.5 per cent a month with nothing else being paid against it.<\/p>\n\n
After 12 months<\/th>Save into the recurring deposit<\/th>Pay the card instead<\/th><\/tr>\n
Recurring deposit value<\/td>Rs 62,210<\/td>Rs 0<\/td><\/tr>\n
Card balance remaining<\/td>Rs 1,51,107<\/td>Rs 78,097<\/td><\/tr>\n
Net position<\/td>Minus Rs 88,897<\/td>Minus Rs 78,097<\/td><\/tr>\n<\/table>\n

Paying the card leaves you about Rs 10,800 better off after one year on those numbers, even though you finish with nothing in savings. The recurring deposit earned Rs 2,210 while the untouched card balance grew by Rs 51,107.<\/p>\n

That is arithmetic, not advice, and there is a real counterargument. Money in a recurring deposit is money you can reach in an emergency, and a cleared card balance is not savings, it is an avoided cost. Many people reasonably keep a small buffer while paying down debt, because the alternative is putting the next emergency back on the same card. The order most people find workable is a small buffer first, then the expensive balance, then the savings habit.<\/p>\n

If a card balance is what is actually sitting between you and being able to save, the rate on that balance is the number to deal with first. BillCut is a debt refinancing platform and therefore has a commercial interest in this category, and it works by converting high interest credit card balances into a loan with a fixed EMI. You can see how BillCut approaches credit card balances<\/a> before deciding whether that route fits.<\/p>\n\n

Who Should Open a Recurring Deposit, and Who Should Not?<\/h2>\n

A recurring deposit suits you if your problem is consistency rather than returns. If money leaves your account before you get round to saving it, a fixed monthly instalment with a maturity date does something no savings account does, which is make the decision once instead of twelve times a year.<\/p>\n

It suits you if you have a dated goal within five years, such as a deposit, a fee or a planned purchase, and you need the money to be there and not be worth less than you put in.<\/p>\n

It suits you less well in three cases. If you have no emergency buffer at all, locking money into a five year commitment is the wrong first move, because the early exit rate is what you will actually receive. If you are carrying a revolving credit card or other high interest balance, the arithmetic above applies. And if your goal is more than seven or eight years away, a product designed to protect capital is not the one designed to grow it.<\/p>\n

One more group is worth naming. If your income is irregular, a fixed instalment you cannot always meet turns a savings product into a source of stress and default fees. The reasons monthly saving fails for so many households are set out in this look at why many Indians cannot save even 5 per cent of salary<\/a>, and most of them are about timing rather than willpower.<\/p>\n\n\n\n

Frequently Asked Questions<\/h2>\n

What is the current recurring deposit interest rate in India?<\/h3>\n

The Post Office 5 Year Recurring Deposit pays 6.7 per cent for the July to September 2026 quarter, a rate the Ministry of Finance revises every quarter. Bank recurring deposit rates are set by each bank under a board approved policy, so they differ between banks and are published on each bank\u2019s own rate card.<\/p>\n

How is interest on a recurring deposit calculated?<\/h3>\n

Interest is calculated on each monthly instalment for the period that instalment remains in the account, and it is compounded quarterly. Your first deposit earns for the full tenure and your last deposit earns for about a month, which is why the total interest is lower than applying the rate to your total deposits.<\/p>\n

What is the minimum amount needed to open a recurring deposit?<\/h3>\n

A National Savings Recurring Deposit Account takes a minimum of Rs 100 a month, in multiples of Rs 10. Banks set their own minimums, which vary, and the figure is published alongside their rates.<\/p>\n

Can I close a recurring deposit before maturity?<\/h3>\n

A National Savings Recurring Deposit Account can be closed prematurely after three years, and you are then paid simple interest at the Post Office savings account rate rather than the recurring deposit rate. For a bank recurring deposit, any premature withdrawal penalty must have been disclosed to you when the deposit was accepted, or it cannot be charged.<\/p>\n

Is recurring deposit interest taxable?<\/h3>\n

Yes. The interest is added to your income and taxed at your applicable slab. Tax is deducted at source by a bank once interest for the financial year crosses Rs 50,000, or Rs 1,00,000 where the recipient is a senior citizen.<\/p>\n

Is money in a recurring deposit safe?<\/h3>\n

A recurring deposit at a bank is insured by the Deposit Insurance and Credit Guarantee Corporation up to Rs 5 lakh per depositor per bank, covering principal and interest together. That limit aggregates all your deposits held in the same capacity at that bank, not each account separately.<\/p>\n

Which gives more, a longer tenure or a bigger monthly deposit?<\/h3>\n

For the same total amount saved, a longer tenure earns more interest, because each instalment stays in the account for longer. Rs 5,000 a month for four years earns more interest than Rs 10,000 a month for two, at the same rate.<\/p>\n

Do recurring deposit rates change after I open the account?<\/h3>\n

No. The rate applicable when the account is opened runs for the full tenure of that deposit. Quarterly revisions to the post office rate and changes to a bank\u2019s rate card apply to accounts opened after the change, not to one already running.<\/p>\n

Can senior citizens get a higher recurring deposit rate?<\/h3>\n

Banks are permitted to formulate term deposit schemes for resident senior citizens at higher and fixed rates than normal deposits, and recurring deposits fall within the definition of term deposits. Whether a particular bank extends that to its recurring deposits is set out on its own rate card.<\/p>\n

What happens if I miss a monthly instalment?<\/h3>\n

Missing instalments interrupts the schedule the maturity value was calculated on, and providers apply their own default charges and rules for regularising the account. Check the specific terms before opening, since these are set by the bank or the scheme rather than being uniform.<\/p>\n\n

This article is for information only. It is not financial, investment or tax advice, and it does not recommend any deposit, bank or repayment decision. Rates, thresholds and rules change, and the small savings rate is revised quarterly, so confirm current figures with your bank or the scheme before acting, and consult a qualified professional about your own situation.<\/em><\/p>\n

\n
    \n
  1. \n

    What is the current recurring deposit interest rate in India?<\/h3>\n
    \n\n

    The Post Office 5 Year Recurring Deposit pays 6.7 per cent for the July to September 2026 quarter, a rate the Ministry of Finance revises every quarter. Bank recurring deposit rates are set by each bank under a board approved policy, so they differ between banks and are published on each bank\u2019s own rate card.<\/p>\n\n<\/div>\n<\/li>\n

  2. \n

    How is interest on a recurring deposit calculated?<\/h3>\n
    \n\n

    Interest is calculated on each monthly instalment for the period that instalment remains in the account, and it is compounded quarterly. Your first deposit earns for the full tenure and your last deposit earns for about a month, which is why the total interest is lower than applying the rate to your total deposits.<\/p>\n\n<\/div>\n<\/li>\n

  3. \n

    What is the minimum amount needed to open a recurring deposit?<\/h3>\n
    \n\n

    A National Savings Recurring Deposit Account takes a minimum of Rs 100 a month, in multiples of Rs 10. Banks set their own minimums, which vary, and the figure is published alongside their rates.<\/p>\n\n<\/div>\n<\/li>\n

  4. \n

    Can I close a recurring deposit before maturity?<\/h3>\n
    \n\n

    A National Savings Recurring Deposit Account can be closed prematurely after three years, and you are then paid simple interest at the Post Office savings account rate rather than the recurring deposit rate. For a bank recurring deposit, any premature withdrawal penalty must have been disclosed to you when the deposit was accepted, or it cannot be charged.<\/p>\n\n<\/div>\n<\/li>\n

  5. \n

    Is recurring deposit interest taxable?<\/h3>\n
    \n\n

    Yes. The interest is added to your income and taxed at your applicable slab. Tax is deducted at source by a bank once interest for the financial year crosses Rs 50,000, or Rs 1,00,000 where the recipient is a senior citizen.<\/p>\n\n<\/div>\n<\/li>\n

  6. \n

    Is money in a recurring deposit safe?<\/h3>\n
    \n\n

    A recurring deposit at a bank is insured by the Deposit Insurance and Credit Guarantee Corporation up to Rs 5 lakh per depositor per bank, covering principal and interest together. That limit aggregates all your deposits held in the same capacity at that bank, not each account separately.<\/p>\n\n<\/div>\n<\/li>\n

  7. \n

    Which gives more, a longer tenure or a bigger monthly deposit?<\/h3>\n
    \n\n

    For the same total amount saved, a longer tenure earns more interest, because each instalment stays in the account for longer. Rs 5,000 a month for four years earns more interest than Rs 10,000 a month for two, at the same rate.<\/p>\n\n<\/div>\n<\/li>\n

  8. \n

    Do recurring deposit rates change after I open the account?<\/h3>\n
    \n\n

    No. The rate applicable when the account is opened runs for the full tenure of that deposit. Quarterly revisions to the post office rate and changes to a bank\u2019s rate card apply to accounts opened after the change, not to one already running.<\/p>\n\n<\/div>\n<\/li>\n

  9. \n

    Can senior citizens get a higher recurring deposit rate?<\/h3>\n
    \n\n

    Banks are permitted to formulate term deposit schemes for resident senior citizens at higher and fixed rates than normal deposits, and recurring deposits fall within the definition of term deposits. Whether a particular bank extends that to its recurring deposits is set out on its own rate card.<\/p>\n\n<\/div>\n<\/li>\n

  10. \n

    What happens if I miss a monthly instalment?<\/h3>\n
    \n\n

    Missing instalments interrupts the schedule the maturity value was calculated on, and providers apply their own default charges and rules for regularising the account. Check the specific terms before opening, since these are set by the bank or the scheme rather than being uniform.<\/p>\n\n<\/div>\n<\/li>\n<\/ol>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    A detailed guide on Recurring Deposits, explaining how RDs work, benefits, interest rates, eligibility, and tips for maximizing returns in India.<\/p>\n","protected":false},"author":2,"featured_media":1009,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","rank_math_title":"Recurring Deposit Interest Rate: What an RD Actually Pays","rank_math_description":"Recurring deposit interest rate: 6.7 per cent at the post office for July to September 2026. What Rs 5,000 a month really grows into, and the early exit cost.","rank_math_focus_keyword":"recurring deposit interest rate","rank_math_primary_category":0},"categories":[68],"tags":[69],"class_list":["post-11980","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fintech-savings","tag-recurring-deposit-basics"],"_links":{"self":[{"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/posts\/11980","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/comments?post=11980"}],"version-history":[{"count":2,"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/posts\/11980\/revisions"}],"predecessor-version":[{"id":15706,"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/posts\/11980\/revisions\/15706"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/media\/1009"}],"wp:attachment":[{"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/media?parent=11980"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/categories?post=11980"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/tags?post=11980"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}