Calculate returns on Recurring Deposits
A Recurring Deposit (RD) is a savings scheme where you deposit a fixed amount monthly for a predetermined period. Interest compounds quarterly at a fixed rate. RDs help build savings discipline and are ideal for regular income earners wanting guaranteed returns.
RD uses quarterly compounding. Each monthly installment earns interest for its remaining tenure. The formula accounts for deposits made at different times. Banks calculate using: M = R[(1+i)^n-1]/(1-(1+i)^(-1/3)), where R is monthly deposit, i is quarterly rate, n is quarters.
Missing installments incurs a penalty (typically ₹1-2 per ₹100 per month). Multiple missed payments may lead to account closure or conversion to FD. Set up auto-debit to avoid missing payments. Most banks allow 1-2 missed payments with penalties.
No, the monthly RD amount is fixed at account opening. To invest more, open another RD. Some banks offer flexi-RDs or step-up RDs where you can increase amounts at predetermined intervals. Check with your bank for such products.
RDs offer guaranteed returns and zero risk, suitable for conservative investors. SIPs in mutual funds can potentially give higher returns (10-15% historically) but carry market risk. RDs are taxable while ELSS SIPs offer tax benefits. Choose based on risk appetite.
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