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Monday, October 25, 2021

Understand the calculation of interest on recurring deposits, financial planning will be easy

The interest on RD is compounded according to the compounding i.e. the benefit will increase on getting RD for longer tenure.

Calculate Interest Rate on Recurring Deposit: Talking about safe investment options, Recurring Deposit (RD) is a better option. Due to not being market linked, it gives investors a fixed return on their deposits. Apart from this, investing in RD earns more interest than FD or savings account, which increases the returns. While deciding your financial planning, it must be understood that how the interest on RD is calculated as this will give an estimate of how much capital can be deposited to achieve your financial goal.

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How is interest calculated on RD

There are different formulas to calculate interest on RD.

If you invest monthly,

M = R [(1+i)n – 1] divided by 1-(1+i)(-1/3)

M: Maturity Value of RD
R: No. of Monthly Installment of RD
n: Tenure (total number of quarters)
I: Interest Rate/400

If you deposit a lump sum amount,

A = P (1 + r/n) ^ nt

A: Final amount
P: Total invested
r: interest rate
n: How many times interest is compounded in a year
t: Total Tenure of RD

Apart from this, many banks or institutions also provide the facility of RD calculator using which you can approximate the value of return on your investment.

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Take care of some important things about investing in RD

  • The interest on RD is compounded according to the compounding i.e. on getting RD for longer tenure, the benefit will increase.
  • While doing RD, at what rate all banks and post offices are giving interest, definitely compare it and invest in the bank where RD is getting more interest.
  • For RD in a bank, it is not necessary to already have a bank account there, but if there is an account in any bank then the RD opens immediately.
  • Senior citizens get interest at a higher rate.
  • RD account can be opened for a period of up to 10 years.

Annual Rates of RD in Various Banks or Institutions

Bank – Rate (General Public) (%) – Rate (Senior Citizen) (%)
HDFC – 6.30 – 6.8
ICICI – 6.2-6.4 – 6.7-6.9
SBI – 6 – 6.5
Allahabad Bank – 6.25-6.45 – 6.25-6.45
IndusInd Bank – 6.65-6.75 – 7.15-7.25
Post Office – 7.2 – 7.2
Yes Bank – 7.25-7.5 – 7.75-8
(Source: bankbazar.com)

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Nisha Chawlahttps://www.businesskhabar.com/
She is an expert in Banking, Finance and working with an international bank. She sharing her ideas and knowledge with Business Khabar.
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