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Recurring Deposit (RD)
rih-KUR-ing dih-POZ-it
A Recurring Deposit is a type of savings account where an individual deposits a fixed amount of money at regular intervals for a specified period. The bank pays interest on the deposited amount, and the total (principal plus interest) is returned to the individual at the end of the maturity period.
Rahul opens a Recurring Deposit account to save ₹2,000 every month for 2 years.
Monthly Deposit: ₹2,000
Interest Rate: 5% per annum
Tenure: 2 years (24 months)
Interest Compounding: Quarterly
Total Deposit: ₹2,000 × 24 = ₹48,000
Approximate Interest Earned: ₹2,520
Maturity Amount: ₹48,000 + ₹2,520 = ₹50,520
At the end of the 2 years, Rahul received ₹50,520 while ensuring that his capital remained safe.
Early banking systems in Europe and Asia had informal structures where people could save money over time. In India and other parts of Asia, people saved through informal community-based savings systems, known as ROSCA (Rotating Savings and Credit Associations), where participants contributed fixed amounts regularly.
Definition
A Recurring Deposit is a type of savings account where an individual deposits a fixed amount of money at regular intervals for a specified period. The bank pays interest on the deposited amount, and the total (principal plus interest) is returned to the individual at the end of the maturity period.
Case Study
Rahul opens a Recurring Deposit account to save ₹2,000 every month for 2 years.
Monthly Deposit: ₹2,000
Interest Rate: 5% per annum
Tenure: 2 years (24 months)
Interest Compounding: Quarterly
Total Deposit: ₹2,000 × 24 = ₹48,000
Approximate Interest Earned: ₹2,520
Maturity Amount: ₹48,000 + ₹2,520 = ₹50,520
At the end of the 2 years, Rahul received ₹50,520 while ensuring that his capital remained safe.
Historical Reference
Early banking systems in Europe and Asia had informal structures where people could save money over time. In India and other parts of Asia, people saved through informal community-based savings systems, known as ROSCA (Rotating Savings and Credit Associations), where participants contributed fixed amounts regularly.