Highest RD Interest Rates 2023: Compare all Banks’ Interest Rates
Recurring deposits and fixed deposits are types of term deposits that are considered least risky investments because they guarantee a fixed return upon maturity. This makes them popular among investors with lower risk tolerance.
With a recurring deposit account, you can accumulate substantial savings by depositing a fixed amount every month over a specific period of time. You will earn interest on your investment based on the RD interest rate. At maturity, you will receive both the invested funds and the accumulated interest.
The interest rate on a term deposit remains the same throughout its tenure. The interest rates on bank recurring deposits typically range between 4% and 8% (Small Finance Banks offer a higher interest rate). The rate of interest on RDs varies based on account type and tenure. While the tenure for RD could vary based on the financial institution, usually it is six months to 10 years. Further, senior citizens usually benefit from a higher interest rate from banks.
Read further to learn about the highest interest rate on recurring deposits offered by government banks and private and small finance banks.
Government Banks with Highest Interest Rates on RD
Here are 10 government banks offering the highest interest rates on recurring deposits as of September 2023.
|Bank||RD Interest Rate||RD Interest Rate for Senior Citizens|
|Canara Bank||5.50% to 6.75%||6.05% to 7.25%|
|Punjab National Bank||5.50% to 6.50%||6.00% to 7.30%|
|Indian Bank||5.5% to 6.70%||6% to 7.20%|
|SBI||6.25% to 6.75%||6.75% to 7.25%|
|Bank of India||5.00% to 6.75%||5.50% to 7.25%|
|Punjab & Sind Bank||2.80% to 7.40%||2.80% to 7.90%|
|Bank of Baroda||5.25% to 6.25%||5.75% to 7.25%|
|Indian Overseas Bank||4.85% to 6.50%||5.35% to 7.00%|
Private Banks with Highest Interest Rates on RD
The following are the 10 private sector banks offering the highest interest rates on recurring deposits as of September 2023.
|Bank||RD Interest Rate||RD Interest Rate for Senior Citizens|
|Yes Bank||5.75% – 7.50%||6.25% – 8.00%|
|Bandhan Bank||4.5% to 7.25%||5.25% to 7.75%|
|IndusInd Bank||6.00% to 7.50%||6.50% to 8.25%|
|Kotak Mahindra Bank||6% to 7.10%||6.5% to 7.60%|
|Federal Bank||3.00% to 7.30%||3.50% to 8.07%|
|City Union Bank||4.00% to 6.30%||4.00% to 6.75%|
|ICICI Bank||4.75% to 6.90%||5.25% to 7.50%|
|HDFC Bank||4.5% to 7.00%||5% to 7.75%|
|Axis Bank||5.75% to 7.26%||6% to 8.01%|
|IDBI Bank||5.50% to 6.75%||6.00% to 7.50%|
Small Finance Banks with Highest Interest Rates on RD
Below are 10 small finance banks and their highest RD interest rates as of September 2022.
|Bank||RD Interest Rate||RD Interest Rate for Senior Citizens|
|AU Small Finance Bank||4.25% to 7.00%||4.75% to 7.50%|
|Capital Small Finance Bank||3.50% to 7.50%||4.00% to 8.00%|
|Fincare Small Finance Bank||3.00% to 8.25%||3.00% to 8.25%|
|Equitas Small Finance Bank||6.75% to 7.40%||7.25% to 7.90%|
|ESAF Small Finance Bank||5.25% to 7.25%||5.75% to 7.75%|
|Suryoday Small Finance Bank||5.00% to 7.25%||5.50% to 7.75%|
|Ujjivan Small Finance Bank||6.70% to 8.45%||7.45% to 9.20%|
|Utkarsh Small Finance Bank||6.50% to 8.00%||7.00% to 8.50%|
|North East Small Finance Bank||4.00% to 7.50%||4.75% to 8.00%|
|Jana Small Finance Bank||4.00% to 7.55%||4.95% to 8.5%|
Features of Recurring Deposits
Bank Recurring Deposits (RDs) have a charm of their own, offering a basket of features that can make anyone give a second glance. Here are some of the key features of RDs:
- Fixed Installments: Think of RDs as a disciplined savings buddy, nudging you to deposit a fixed amount every month.
- Interest Rates: What’s not to love about attractive interest rates? They’re usually in the same ballpark as Fixed Deposits, helping your wealth grow.
- Flexible Tenure: Whether you’re eyeing short-term or long-term goals, RDs have got you covered with flexible tenures ranging from 6 months to 10 years.
- Compounding Interest: The interest is compounded quarterly, so your money builds up nicely over time.
- Minimum Deposit: The low entry point makes RDs very attractive. It means a wide range of investors can hop on board.
- Premature Withdrawal: You can withdraw early, but beware, penalties apply and they can eat into your returns.
- Loan against RD: Many banks let you take out a loan against your RD.
- TDS Deduction: Keep in mind, that based on taxation laws in your state, banks may deduct TDS.
- Senior Citizen Benefit: For the seasoned citizens among us, there’s good news. Higher interest rates are typically available, aiding in financial planning.
The Advantages and Disadvantages of Opening an RD Account
RDs can be a pretty smart move if you’re aiming for a low-risk savings option. However, there are downsides even for a facility like this. Here’s a general rundown of the advantages and disadvantages:
- Savings Discipline: RDs help you get into the groove of saving regularly since you put in a fixed amount every month.
- Competitive Interest Rates: They offer some pretty decent interest rates, usually in the neighborhood of Fixed Deposits.
- Flexible Tenure: With the freedom to choose tenures from 6 months to 10 years, you can align your RD to your lifestyle.
- Low Minimum Deposit: RDs are welcoming to everyone, having low minimum deposit values.
- Loan against RD: If you hit a financial snag, you can leverage a loan against your RD account.
- Safety: With RDs being a bank product, you’re in safe hands.
- Tax on Interest: Here’s the catch – the interest earned on RDs is taxable, which might eat away at your overall returns, especially if you’re in the higher tax brackets.
- Penalty on Premature Withdrawal: If you need to pull out early, there’s a penalty for that, trimming down your final takeaway.
- Lower Returns than Equities: If you compare, RDs might not flex as much in returns as equity investments, which, sure, are riskier but have the gains to show for it.
- Inflation Risk: The risky thing about RD returns is they might not always race ahead of inflation, and that means – a potential dip in purchasing power.
Eligibility Criteria To Apply for an RD
Here’s the general list of entities eligible to apply for an RD:
- Non-Resident Indians (NRIs)
- Hindu Undivided Families (HUFs)
- Senior Citizens
- Partnership Firms
- Sole Proprietorship
- Companies (including group companies and family companies)
- Trusts and Foundations
Documents Required to Apply for RD
- PAN Card
- Voter ID Card
- Driving License
- Government ID Card
- Senior Citizen ID Card
- Telephone Bill
- Electricity Bill
- Bank Statement with Cheque
- Certificate/ID issued by Post Office
- Ration Card
- Lease Agreement
How to Calculate Interest Rate for Recurring Deposit Scheme?
You can use the following calculation to determine the interest on a recurring deposit (RD):
M = P*(1+R/N)^Nt
M = Maturity amount.
P = Principal amount.
R = Interest rate in decimal.
T = Time duration in months
t = Time duration in years
N= compounding frequency (since it is quarterly, it will be 4)
This describes the method for calculating compound interest, which banks typically apply quarterly to deposits. However, when calculating compound interest on a recurring deposit, the starting balance of the quarter is taken into account.
Therefore, if a recurring deposit is initiated mid-quarter, interest for the months until the commencement of a new quarter is computed simply, and from the new quarter onward, compound interest is applied. This could result in a minor discrepancy between a manual calculation and the actual amount received upon maturity.
Premature Withdrawal of RD
This explains how banks normally apply compound interest to deposits on a quarterly basis. However, the beginning balance of the quarter is taken into consideration for calculating compound interest on a recurring deposit.
Therefore, if a recurring deposit is started in the middle of a quarter, interest for the months leading up to the start of a new quarter is computed simply, and compound interest is applied after that. A manual computation and the actual amount received upon maturity may differ slightly as a result.
Partial Withdrawal of RD
Navigating partial withdrawals when it comes to Recurring Deposits (RD) can be a little challenging. Banks and other financial institutions typically do not permit partial withdrawals, so once you begin an RD, you are typically expected to continue making monthly payments until maturity. You might have to think about prematurely closing the entire RD account if you need some money.
However, it’s a good idea to double-check with your particular bank because policies might change and there can be other ways to satisfy your goals without delaying your RD journey. Remember that thoroughly understanding the conditions and potential consequences will help you make an informed choice.
Tax Exemptions of an RD
Diving into the tax nuances of Recurring Deposits (RDs) can be quite insightful. It’s important to note that the interest you earn on your RDs isn’t exempt from tax. In fact, it faces Tax Deducted at Source (TDS) if it goes beyond a specific limit in a financial year. But here’s a bit of good news – if you fall under certain income categories, you can dodge this TDS by submitting Form 15G/15H.
However, remember, this doesn’t turn your interest income tax-free; it merely postpones the tax deduction. So, you’ll still need to declare this income when you file your taxes, and it will be taxed according to your corresponding income slab. While RDs are a great way to save systematically, it’s smart to keep the tax aspect in mind when you’re considering the returns.
Factors That May Affect Recurring Deposit Interest Rates
The interest rates on recurring deposits (RDs) could change as a result of a number of factors, which makes the potential earnings rather unpredictable.
Economic Environment: First, the overall economic environment is important since rising economies frequently see matching changes in interest rates.
Monetary Policy: The RBI’s (the Reserve Bank of India) position on monetary policy is another crucial element. The interest rates banks can charge on deposits, including RDs, are directly impacted by changes in the repo rates set by the RBI.
Tenure: Additionally, the RD tenure you choose may have an impact on the interest rate you receive. Choosing a longer tenure will typically result in a better rate. Not to mention that each bank has its own set of internal policies and plans that influence the interest rates they offer. Therefore, it is advisable to keep up with these changing elements and potentially investigate various banks to obtain the greatest rate for your RD.
Types of RD Schemes
From what you’ve read upto now, you can possibly deduce why RDs are so sought after. To make things better, there are multiple types of RDs in the market, making it very helpful for you to invest in particular RDs that well align with your lifestyle.
Standard RDs: The preferred option for many, Standard RDs provide a fixed interest rate and are a dependable option for long-term, stable savings growth.
RD for NRIs: These RDs, which are created especially for Non-Resident Indians, provide a safe way to invest and frequently come with features to accommodate the unique financial circumstances of living overseas.
Flexi RDs: These RDs emphasise flexibility by allowing depositors to make varied monthly contributions to accommodate fluctuating income.
Children RDs: A considerate choice for parents wishing to create a savings account for their children’s future, frequently with added features and advantages.
Tax-Saver RDs: A blessing for individuals wishing to reduce their tax obligations, these RDs provide tax advantages under Section 80C, but they also have a required lock-in period.
Variable RDs: If you’re looking for some flexibility, these plans let you adjust when your financial situation changes by allowing changes to the monthly payment.
Senior Citizen RDs: Designed specifically for our seasoned savers, these RDs frequently have a little higher interest rate in recognition of the particular financial requirements of senior citizens.
The recurring deposit interest rate varies depending on multiple factors, including the deposit amount and its tenure, as well as the type of RD account. Furthermore, selecting the right bank is crucial for securing a high-interest rate on recurring deposits. As seen in the interest rate tables, small finance banks and private banks usually offer the highest RD interest rates compared to government banks. Most banks offer interactive RD calculators, which you could use to estimate your total interest payment upon maturity.
Is the interest earned on RD subject to TDS?
The interest earned on recurring deposits is subject to a TDS of 10% when the interest earned exceeds Rs. 40,000. This limit is Rs. 50,000 for senior citizens.
Which banks offer the best RD interest rates?
Canra bank offers 7.17% interest, which is among the highest available rates by a government bank. Bandhan Bank offers 7.5% interest rate for the tenure of one year to less than five years, which is one of the highest available from private sector banks. Small finance banks usually offer attractive interest rates. For example, Utkarsh Small Finance Bank provides an interest rate of 8% for a tenure of two to three years. However, these interest rates are subject to change.
What is the minimum tenure for recurring deposits?
The minimum term for recurring deposits (RDs) differs from bank to bank. The minimum tenure could range from six to twelve months.
Which bank gives more interest on RDs for senior citizens?
Most banks offer an additional 0.5% interest on senior citizen RDs. Utkarsh Small Finance Bank offers an interest rate of 8.50% for a two- to three-year term, making it one of the highest rates available from small finance banks for senior citizens. Among private sector banks, Bandhan Bank offers 7.50% interest rate for RDs in the one-year to less-than-five-years tenure. However, these interest rates are subject to change.
What is the minimum deposit amount required for the opening of a recurring deposit account?
The minimum deposit amount for opening an RD account varies across banks, typically starting from as low as INR 500 or 1000.
How can I apply for a recurring deposit account?
You can apply for an RD account either online through the bank’s website or by visiting a nearby bank branch.
Is the RD interest rate pre-fixed?
Yes, the interest rate for Recurring Deposits is pre-fixed by the bank at the time of account opening.
Can I pay more than one installment at a time?
While policies may vary, most banks generally allow only one installment deposit in a month for RD accounts.
What is the minimum tenure on a recurring deposit account?
The minimum tenure for a recurring deposit account is usually 6 months, with the maximum tenure extending up to 10 years.
What is the nomination facility in an RD account?
The nomination facility in an RD account allows you to designate an individual to receive the funds in the event of the depositor’s demise.
What is the importance of checking Bank RD interest rate before opening an RD account?
It’s crucial to check the bank RD interest rate before opening an account to ensure you receive competitive returns and meet your financial goals.