RD is the disciplined cousin of FD. You deposit a fixed amount every month, and the bank pays you interest on the accumulated balance. Great for people who want to save small amounts regularly.
A Recurring Deposit is essentially a series of monthly fixed deposits. Every month, you deposit a fixed amount (minimum ₹100 in most banks, ₹100 at post offices). The bank treats each monthly deposit as a separate FD and calculates interest on each deposit for the remaining tenure. At maturity, you get back the sum of all deposits plus the accumulated interest.
Most banks compound RD interest quarterly, which is the formula this calculator uses. Post offices also offer RDs at competitive rates — currently around 6.7% for a 5-year RD, which is comparable to many bank rates. The key advantage of an RD over manually saving money each month is the discipline it enforces and the guaranteed returns.
This is a common question, and the answer depends on your risk appetite. RD gives guaranteed returns at a fixed rate with zero risk. SIP invests in mutual funds with market-linked returns that can be higher (12-15% historically for equity) but also involve risk and volatility. For your emergency fund or short-term goals (1-3 years), RD is better. For long-term wealth building (5+ years), SIP is almost always superior because of higher post-inflation returns.
Also try: FD Calculator | SIP Calculator | PPF Calculator