Beginner guide · 4-minute read
Recurring deposits, explained simply
A recurring deposit (RD) lets you save the same amount every month for a set time, at a fixed interest rate. It's a simple way to build a saving habit.
Checked on 14 Oct 2026 against the Ministry of Finance small savings rate notice for Oct–Dec 2026.
In one minute
- Where
- Banks and post offices.
- What it pays
- Bank RDs usually match the bank's FD rates. The Post Office RD pays 6.7% (Oct–Dec 2026).
- How long
- Banks offer 6 months to 10 years. The Post Office RD runs for 5 years.
- How much
- From ₹100 a month at the post office; banks set their own minimum.
How it works, with real numbers
Save ₹5,000 a month in a Post Office RD for 5 years. You put in ₹3,00,000, and at 6.7% you get back ₹3,56,829.
Interest is compounded every quarter and taxed every year at your slab rate. At a 30% slab you'd keep about ₹3,39,098 after tax.
How the Post Office RD rate has changed
Post Office RD pays 6.7% today, unchanged since October 2023. Since it began in April 1981, it has ranged from 5.8% (2020–2023) to 13.5% (1991–1993).
- The rate on the day you invest stays fixed for your whole term. Later changes, up or down, don't affect money you've already put in.
- Rates were higher in the 1980s and 1990s, when prices were also rising faster. What counts is how far the rate stays ahead of inflation (5.54% now).
See every rate change (27)
| Period | Rate a year |
|---|---|
| Oct 2023 – now | 6.7% |
| Jul 2023 – Sep 2023 | 6.5% |
| Apr 2023 – Jun 2023 | 6.2% |
| Apr 2020 – Mar 2023 | 5.8% |
| Jul 2019 – Mar 2020 | 7.2% |
| Oct 2018 – Jun 2019 | 7.3% |
| Jan 2018 – Sep 2018 | 6.9% |
| Jul 2017 – Dec 2017 | 7.1% |
| Apr 2017 – Jun 2017 | 7.2% |
| Oct 2016 – Mar 2017 | 7.3% |
| Apr 2016 – Sep 2016 | 7.4% |
| Apr 2014 – Mar 2016 | 8.4% |
| Apr 2013 – Mar 2014 | 8.3% |
| Apr 2012 – Mar 2013 | 8.4% |
| Dec 2011 – Mar 2012 | 8% |
| Mar 2003 – Nov 2011 | 7.5% |
| Mar 2002 – Feb 2003 | 8.5% |
| Mar 2001 – Feb 2002 | 9% |
| Jan 2000 – Feb 2001 | 10.5% |
| Jan 1999 – Jan 2000 | 11.5% |
| Sep 1993 – Dec 1998 | 12.5% |
| Oct 1991 – Sep 1993 | 13.5% |
| Apr 1991 – Sep 1991 | 11.5% |
| Apr 1987 – Mar 1991 | 11% |
| Mar 1983 – Mar 1987 | 11.3% |
| Apr 1982 – Feb 1983 | 10.3% |
| Apr 1981 – Mar 1982 | 9.9% |
Source: National Savings Institute, Ministry of Finance, rates since launch; Oct–Dec 2026 from the Ministry's latest notice.
Pros and cons
Good things
- Builds a habit. A fixed amount goes in every month, usually by auto-debit.
- Start small. ₹100 a month is enough at the post office.
- Known result. The rate is fixed, so you know the maturity amount in advance.
- Safe. The Post Office RD is government-backed; bank RDs are insured up to ₹5 lakh per bank.
- Good for short goals. Fees, a trip or a gadget a year or a few away.
Things to watch
- Taxed every year. Interest is taxed at your slab rate as it builds up.
- Missed instalments cost you. There's a small fee, and too many misses can close the account.
- Hard to exit early. The Post Office RD can only be closed early after 3 years.
- Often trails inflation after tax. Fine for short goals, weak for long ones.
- Fixed amount. You can't raise or lower the instalment once it starts.
Is it right for you?
Mistakes to avoid
- Missing instalments. Set up an auto-debit for the day after your salary arrives.
- Forgetting tax. RD interest is taxable each year, and banks deduct TDS on it.
- Using an RD for very long goals. Over 15 years, options that beat inflation matter more.
How to start
- Choose a bank or post office.
- Decide the monthly amount and the term.
- Open it in your bank's app or at the branch/post office with KYC (PAN and Aadhaar).
- Set up auto-debit so you never miss a month.
- Add a nominee.
Words you'll see
- Instalment
- Each monthly payment into the RD.
- Maturity
- The end of the term, when you get the total back.
- Quarterly compounding
- Interest is added every 3 months and then earns interest itself.
- Default fee
- A small charge for a missed instalment.
This guide explains how things work. It is not advice on what you should invest in. NetReturns is not SEBI-registered.