How to Calculate the Interest Rate of Recurring Deposit?

Recurring Deposits are considered to be one of the safest and most preferred savings instruments available in the market. As one of the most popular investment instruments, recurring deposit schemes allow investors to invest a fixed amount of money per month towards the scheme and earn interest on it.

The recurring deposits scheme provides an opportunity for the investors to accumulate funds to fulfill the short-term financial objectives of life. Almost all banks across the country offer the option to open an RD account at an attractive interest rate. Moreover, most of the banks also provide the facility of a Recurring Deposit calculator, which helps the investors to evaluate the total amount that they will receive at the time of maturity of the scheme. Let’s read further to know in detail about the Recurring Deposit calculator and how to calculate the interest rate of RD.

What is a Recurring Deposit Calculator?

RD calculator is a financial tool that helps investors to determine the amount they will receive on the maturity of the RD scheme. The investor can either use the RD calculator offered by various banks or simple formula to evaluate the maturity amount. By using the RD calculator one can get the result immediately and free of cost. The interest applicable on the invested amount is compounded quarterly.

How to Calculate the RD Interest Rate?

Three different variables go into the computation of the RD maturity amount. The Rd calculator assigns these variables to a standard formula to derive the exact maturity amount. Let’s take a look at the RD maturity formula and how the RD interest rate of calculated:

A=P*(1+R/N)^(Nt)

The variables in this equation are:

Instead of calculating the maturity amount manually, the investors can use the RD calculator offered by various banks to evaluate the amount.

What are the Factors that Affect the RD Interest Rates?

Here are some of the important factors that affect the RD interest rates:

1. Tenure- Tenure is basically the duration for which the money is invested in an RD scheme. This is one of the most important factors that affect the interest rate of RDs. The rate of interest of RD varies across different tenure options.

2. Age of Applicant- Banks and other financial institutions provide a higher interest rate to the senior citizens. The difference may range between 0.50% and 0.75% in addition to the basic interest rates applicable on the RD scheme. It is important to keep in mind that the minimum age criteria of senior citizens may vary as per the provider.

3. Current Economic Environment- As per the changes in the economic condition, the banks and other financial institutions providing RD schemes keep on updating their rate of interest. This can be due to various reasons such as a change in the repo rate by RBI, inflation, etc. Thus, the current economic condition also plays a vital role in determining the RD rates.

Process to Use Recurring Deposit Calculator

Here is the step by step process to use the online recurring deposit calculator:

• Enter the amount that you will deposit per month
• Enter the tenure of RD investment
• In case you are using the RD calculator offered by the bank, then the interest rate will apply automatically. If you are using the third-party website RD calculator, then you will have to enter the applicable interest rate
• Once you enter all the details click on ‘Calculate’. The result will be displayed immediately

Advantages of Using Recurring Deposit Calculator

Following are some of the basic advantages of using a recurring deposit calculator:

• Provides accurate estimation of the maturity amount
• The calculator is very convenient to use and saves time
• With the help of the RD calculator the investors can plan their finances in the long-term

The Bottom Point!

Investing in RDs is best suitable for investors who are looking for a safe investment option and for those who do not want to invest in lump-sum but in regular installments. Investors can make use of the aforementioned information to calculate the interest rate of recurring deposits.

FAQs

Is there any penalty charge levied on the RD scheme in case of delay in the monthly deposit?

Yes, depending on the bank and period of delay a penalty is imposed on the monthly payment

What are the different methods to open an RD account?

There are different methods through which an individual can open an RD account. These are:

• Through Internet Banking
• Through Mobile Banking
• By Visiting the Branch

Is the interest gained on the RD account taxable?

Yes, the interest earned on the invested amount in RD is taxable.

Is the interest paid on RD compounded quarterly?

Yes, the interest paid on RD is compounded quarterly.

What is the current interest rate applicable on the RD account?

The current rate of interest applicable on the RD account ranges from 4%-6.5%.

Surobhi Bose

A financial writer with more than 6 years of work experience in the industry who keeps a professional approach with hands-on knowledge in digital marketing. In her free time, she loves to explore new places, doing photography and also loves to sing.