Recurring Deposit Interest Rates 2026: Best Banks Compared

Recurring Deposits: India's Systematic Savings Engine

Recurring Deposits (RDs) are one of India's most popular savings instruments, particularly for salaried employees who want a structured way to build savings month by month. With RDs, you commit a fixed amount every month, and at the end of the tenure, you receive a lump sum that includes all your deposits plus compounded interest.

Over 40 million Indian households use RDs as their primary savings tool, according to RBI data. The appeal is simple: it enforces financial discipline without requiring a large upfront lump sum.

RD Interest Rates Across Banks (2026)

Major Public and Private Sector Banks

Bank	1 Year RD	2 Year RD	3 Year RD	5 Year RD
SBI	6.50%	6.75%	7.00%	7.00%
Bank of Baroda	6.60%	6.85%	7.00%	7.00%
HDFC Bank	6.50%	7.00%	7.00%	7.00%
ICICI Bank	6.60%	7.00%	7.00%	7.00%
Axis Bank	6.50%	7.00%	7.00%	7.00%
Punjab National Bank	6.50%	6.75%	6.90%	7.00%
Canara Bank	6.60%	6.80%	6.85%	7.00%

Small Finance Banks (Higher Rates)

Bank	1 Year RD	2 Year RD	3 Year RD	5 Year RD
AU Small Finance	7.00%	7.25%	7.50%	7.50%
Equitas Small Finance	7.00%	7.50%	7.75%	8.00%
Jana Small Finance	7.50%	8.00%	8.25%	8.50%
Ujjivan Small Finance	7.00%	7.50%	7.75%	8.00%

Post Office Recurring Deposit

Tenure	Interest Rate	Tax Benefit
5 Years	6.90% p.a.	80C (up to ₹1.5L)

Senior Citizen RD Rates (Extra 0.25-0.50%)

Most banks offer an additional 0.25-0.50% interest for senior citizens (aged 60+) on RDs:

• SBI Senior Citizen RD: 6.90% - 7.50%
• AU Small Finance Senior Citizen RD: 7.50% - 8.00%
• Jana Small Finance Senior Citizen RD: 8.00% - 9.00%

RD vs Other Savings Instruments

| Instrument | Best For | Interest Rate (2026) | Tax Status | |---|---|---|---| | RD (Bank) | Systematic monthly savings | 6.50% - 8.50% | Interest taxable | | Post Office RD | Tax-saving (80C) | 6.90% | Interest taxable, 80C eligible | | SIP (Equity MF) | Long-term wealth building | 12-15% historical | Capital gains tax | | PPF | Long-term, tax-free | 8.20% | EEE status | | Savings Account | Emergency fund, liquidity | 2.75% - 4.50% | Interest taxable |

How RD Interest is Calculated

RD interest is calculated using the compound interest formula, but on a monthly basis. The formula accounts for each monthly deposit being invested for a different length of time (first deposit earns interest for the full tenure, last deposit earns interest for just one month).

For ₹5,000/month for 3 years at 7%:

• Total Deposited: ₹1,80,000
• Maturity Amount: ₹2,07,360 (approx)
• Interest Earned: ₹27,360

Frequently Asked Questions

Can I withdraw my RD before maturity?

Yes, premature withdrawal is allowed by most banks, but with reduced interest rates. Typically, the interest is paid at 1-2% below the contracted RD rate. Some banks also charge a small penalty. For post office RDs, premature withdrawal is allowed after 1 year with reduced interest.

Is RD better than SIP for short-term goals?

For goals under 3-5 years, RDs are generally safer — they guarantee the principal with no risk of negative returns. Equity SIPs, while potentially giving higher returns, can have periods of negative returns (e.g., 2020 COVID crash, 2022 market correction) that make them unsuitable for short-term goals. For goals under 3 years, RDs are typically the better choice.

Is interest earned on RD taxable?

Yes. Interest earned on bank RDs is fully taxable as "Income from Other Sources." Banks deduct TDS at 10% if the total interest earned in a financial year exceeds ₹40,000 (₹50,000 for senior citizens). If your total income is below the taxable threshold, submit Form 15H to avoid TDS.

Compare Before Committing

The difference between the lowest and highest RD rate (6.50% vs 8.50%) on a ₹5,000/month, 5-year RD is approximately ₹20,000 in extra interest. Use our RD Maturity Calculator to compare exact maturity values across banks for your monthly investment amount and tenure.