recurring deposits

Demystifying Recurring Deposit Accounts (RD): Your Key to Consistent Savings

Recurring Deposit (RD)

Recurring Deposit (RD) Account is a valuable financial tool that can help you cultivate consistent savings. Unlike regular savings account, RDs enable you to deposit a fixed amount at regular intervals, making it an ideal choice for individuals seeking disciplined savings. In this blog, we delve into the inner workings of RD account, their eligibility and documentation requirements and some tips to maximise your gains from an RD. Whether you're a seasoned saver or just starting your savings journey, read on to know how RDs can empower you to achieve your financial goals with ease and reliability.

What Is A Recurring Deposit?

RD account means a form of savings plan made available by banks and other financial institutions that allows people to regularly save a certain amount of money. RD account provide you with the option to deposit a certain amount monthly, unlike standard fixed deposit account, where a single sum is put all at once. The RD normally has a predetermined duration, and at the end of that tenure, the depositor receives the maturity amount, which consists of the principal and interest accrued throughout the tenure.

Suppose that you create a 12 month RD account with a monthly payment of Rs.2,000 and a 6.5% annual interest rate. You are required to deposit Rs.2,000 into the RD account on a specified date of each month. The interest collected on this monthly deposit will then be calculated by the bank using the current interest rate and added to your principal sum. As a result, interest is compounded each month, resulting in your funds increasing gradually.

Requirements for Eligibility and Documentation


Any resident Indian, including minors, is eligible to create an RD account. The majority of banks have simplified the procedure by allowing people to create RD account either individually or jointly.

Documentation Requirements:

Typically, if you have an account in the bank you choose to open an RD with, you do not have to submit any additional documents. For instance, if you wish to open an RD in Kotak Bank, you only have to provide the bank with your savings account details from which the funds would be deducted.

Benefits of Recurring Deposit Account

For Indian savers, Recurring deposit account have a number of benefits.

Consistency and Discipline: Consistency and discipline are essential for financial stability and progress. These characteristics are shown by RDs, which provide a planned and methodical approach to saving. It allows account holders to develop a good savings habit by designating a predetermined amount to be placed away monthly.

No lump-sum obligation: A recurring deposit account provides an enjoyable break from the heavy lump-sum deposits required of conventional savings techniques. You can make regular, reasonable contributions in lower amounts by setting up recurring instalments.

Increased Interest Rates: Regular savings account typically offer lower interest rates than those offered on recurring deposits, which increases the potential for savings to grow. This equates to increased returns that progressively build up during the deposit period.

Perfect for short- and medium-term goals: RD account consistently support your goals, making them a great option for achieving goals with set deadlines. You can proceed confidently toward fulfilling your ambitions with flexible tenure options and consistent returns supported by sound financial judgement.

Step by Step Guide For Opening An RD Account Online

This guide will lead you through the process and make sure you have all the knowledge you require.

Step 1: Choose the Right Bank: To make a well-informed decision, research and compare multiple banks based on interest rates, tenure choices, and customer evaluations. For a smoother experience, choose a bank with a user-friendly online banking system.

Step 2: Access the Bank's Online Portal: Once you've chosen a bank, find the "Open RD Account" or "Recurring Deposit" option on their official website.

Step 3: Register or Log In: Log into your online banking account if you are an existing customer of the bank. For new users, you must open a new account and register and generate a secure login ID and password.

Step 4: Navigate to the recurring Account Opening Section: Log in and go to the option for setting up an RD account. Go through the details about the bank's RD options before opening the account.

Step 5: Fill Out the RD Application Form: You must complete the online application form after choosing your preferred RD account choice. Fill in your personal information.

Step 6: Fund Your Recurring Deposit Account: You will be asked to fund your RD account after submitting the application form. Select an account for fund transfer. Your RD account will be formally activated once the payment is successful.

Tips for Maximising RD Gains

Let's look at a few important tips that will enable you to maximise your RD investments.

A. Selecting the Ideal RD Tenure: The tenure you choose has a significant impact on the investment's maturity value. Longer tenures are recognised for their capacity to generate significant returns through compounding, whilst shorter tenures provide quicker access to your assets.

B. Understanding the Power of Compounding: Compounding is an essential component that can significantly boost your long-term RD gains. When you compound, your interest earns interest, causing a rise in your wealth. Make sure you dutifully provide the predetermined amount each month so compounding can do what it does best over time.

C. Penalty and Consequences for Missed Payments: Missed payments can have adverse impacts that reduce your earnings. For RD payments, financial institutions often provide a grace period. To avoid fines, it's crucial to understand the precise length and conditions of this grace period. Knowing about this safety zone will spare you from needless worry.


RD account is the key to reliable savings and financial prosperity. They are a sensible choice due to their flexibility, compounding returns, and methodical attitude. The recurring account tenure and any potential repercussions of missing payments must, however, be kept in mind. Shorter tenures provide immediate access to cash, while longer tenures give the advantage of compounding. Understanding the grace period for missing payments also offers a stress-free savings experience by preventing excessive fines. As you begin your financial journey, you should know what is a recurring deposit and include them as a key component of your plan to ensure a more promising and secure future.

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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.