Recurring Deposit (RD) Calculator
A Recurring Deposit (RD) is a special kind of term deposit offered by banks which helps people with regular incomes to deposit a fixed amount every month into their recurring deposit account and earn interest at the rate applicable to Fixed Deposits.
How is RD Interest Calculated?
Interest on RDs is compounded quarterly. However, since deposits are made monthly, the interest is calculated differently for each monthly installment based on how long it remains in the account until maturity.
M = R * [((1 + i)^n - 1) / (1 - (1 + i)^(-1/3))]
Where:
M = Maturity value
R = Monthly installment
i = Rate of interest / 400
n = Total number of quarters
Example:
If you deposit ₹5,000 every month for 3 years (36 months) at an interest rate of 6.5% p.a.:
Total Invested = ₹5,000 * 36 = ₹1,80,000
Interest Earned = ₹19,105
Maturity Value = ₹1,99,105
Advantages of an RD
- Habit of Savings: Instills financial discipline by requiring a fixed monthly deposit.
- High Interest: Earns interest rates similar to Fixed Deposits, which are higher than savings accounts.
- No Lump Sum Required: You can build a large corpus by saving very small amounts every month.