How an RD works
You choose a monthly amount and a term. The bank or post office takes that amount from your account every month and pays interest on each instalment for the time it stays deposited, usually compounded quarterly. At maturity you get your deposits plus interest. Try it with the calculator above.
Bank RD vs Post Office RD
| Bank RD | Post Office RD | |
|---|---|---|
| Term | Usually 6 months to 10 years | 5 years (can be extended) |
| Rate | Same as the bank's FD rate for that term, usually | 6.7% (Oct–Dec 2026) |
| Minimum | Often ₹100–₹1,000 a month | ₹100 a month |
| Backing | DICGC insurance to ₹5 lakh per bank | Government of India |
Example: ₹5,000 a month in the Post Office RD for 5 years at 6.7% matures at about ₹3,56,830 — ₹3,00,000 of deposits and about ₹56,830 of interest.
Rules to know
- Missed instalments attract a small penalty; after several in a row the account may be closed.
- Early closure is usually allowed with a lower rate (the post office allows it after 3 years).
- Loans against an RD are possible at many banks and the post office.
- Tax: interest is taxable at your slab rate, and banks deduct TDS once your total deposit interest crosses the threshold.
Using an RD well
- Set the RD date a day or two after your salary date, so the money goes before you spend it.
- Match the term to the goal: a 12-month RD for next year's holiday, a 3-year RD for a down payment.
- Saving towards a big purchase lowers how much you need to borrow later — plan the rest with the EMI calculator.
Compare with a lump-sum deposit in FD vs RD, or with a SIP for goals five years or more away.
For general information only, not investment advice or a recommendation. Oxon Fintech is a loan facilitation platform, not a SEBI-registered investment adviser, bank or mutual fund distributor, and does not sell bonds, deposits or funds. Rates and rules are as checked on the date above; confirm with the issuer, bank or fund house before investing. Mutual fund investments are subject to market risks; read all scheme-related documents carefully.