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The RD full form is Recurring Deposit: you put the same fixed amount into the account every month for a set period, and the bank or post office pays interest and returns the whole sum on maturity. It suits people who can save a little from each salary but cannot put a large lump sum aside at once.
So when someone asks what is RD in a bank, the plain answer is a monthly savings plan with a fixed rate that is locked in on the day you open it. This page walks through how the money grows, a worked example, what happens if you miss a month, and how the post office version differs from a bank one.
At a glance
Full form
Recurring DepositOffered by
Banks, small finance banks and post officesDeposit
Same amount every month; post office minimum 100 rupeesPeriod
Post office: 5 years. Banks: usually 6 months to 10 yearsPost office rate
6.7% a year, compounded every quarterTax
Interest is taxable as income
RD full form and its meaning in banking
RD stands for Recurring Deposit. The word recurring means it happens again and again, and that is the whole idea: one deposit each month, same amount, same date. People also type rd ka full form or rd means in bank when they see the letters on a passbook or a bank form. The meaning does not change between a bank and the post office.
The RD meaning in a bank is close to a fixed deposit, with one difference. In an FD you pay once at the start. In an RD you build the balance slowly. Both lock the rate on the opening day, so a later rate cut does not touch your account.
How an RD account grows month by month
Every installment earns interest only after it lands in the account. The first one earns for the full term, the last one for only a month. Most banks and the post office add interest every quarter and then pay interest on that interest, which is called quarterly compounding.
- You choose the monthly amount and the term when you open the account.
- The first installment is paid on opening; later ones fall due on the same date each month.
- Interest builds inside the account; you do not get it as cash every month.
- On maturity, the full sum of deposits plus interest is paid to you or moved to your savings account.
You cannot raise or lower the monthly amount later in a normal RD. To save more, open a second account.
Worked example: 1,000 rupees a month at the post office
Say you deposit 1,000 rupees a month in a 5 year post office RD. You pay 60 installments, so 60,000 rupees in total. At 6.7%, compounded quarterly, the maturity value at the current rate comes to about 71,366 rupees. That is roughly 11,366 rupees of interest.
A bank RD works the same way, but the result depends on that bank's rate and term. To try your own numbers, use the RD calculator or, for the post office version, the post office RD calculator.
Bank RD and post office RD side by side
| Point | Bank RD | Post office RD |
|---|---|---|
| Term | Often 6 months to 10 years, in steps of 3 months | Fixed at 5 years, can be extended |
| Minimum | Set by each bank, often 100 rupees or more | 100 rupees, then multiples of 10 |
| Rate | Set by the bank; senior citizens often get a little extra | 6.7%, set by the Union government each quarter for new accounts |
| Safety | DICGC insurance covers 5 lakh rupees for each depositor in each bank | Backed by the Union government |
| TDS | Bank deducts TDS above the yearly limit | No TDS, but interest is still taxable |
For the full post office rules, read the post office RD guide. Bank rates change often, so check the current rate card on the bank website or at the branch.
Missed installments, loans and closing early
At the post office, one rupee is charged as default fee per month of delay on each hundred rupees of installment. After four missed installments in a row the account stops and is marked discontinued, and it can be revived within two months by paying the dues with the fee. Banks set their own penalty, so ask at your branch.
After 12 installments the post office will lend you as much as 50 percent of what has built up. Early closure of a post office RD opens up once three years pass; the payout then uses the lower savings account rate. Banks usually allow early closure at any time with a small cut in the rate.
Tax on RD interest
For tax, RD interest is simply part of your yearly income, so your normal slab applies. Nothing you deposit earns a tax deduction. Banks deduct TDS when the yearly interest from all your deposits in that bank crosses the limit in the Income Tax rules; senior citizens have a higher limit. When your yearly income stays under the tax free level, hand in Form 15G (below 60) or Form 15H (60 and above) so the bank skips TDS. See tax on deposit interest for the same rules explained with FD examples.
Flexi RD and other variations
Flexi RD means a recurring deposit where you may pay more than the fixed amount in some months, within limits the bank sets. Some banks also offer a sweep facility that moves surplus money from savings into an RD. These are bank products, not post office ones, and terms differ a lot, so read the bank's own rules before signing.
Some people confuse an RD account with a SIP in a mutual fund. A SIP is market linked, so its value can fall. An RD gives a fixed rate decided on the day you open it.
How to open an RD account
- Keep your Aadhaar, PAN and a passport size photo ready, plus your savings account details.
- At a bank, open it through net banking, the bank mobile app or the branch. Choose the amount, term and the date for auto debit.
- At a post office, fill the opening form at the counter and pay the first installment in cash or by cheque.
- Add a nominee. This makes the claim easy for your family later.
- Keep the receipt or passbook and note the maturity date.
Frequently asked questions
What is RD in bank in simple words?
It is a savings account where you deposit the same amount every month for a fixed period. The bank adds interest at a rate fixed on the opening day and pays you the total at the end.
What is the RD full form in banking?
RD stands for Recurring Deposit. Banks and post offices use the same short form on forms, passbooks and statements.
What does RD mean on my passbook?
An entry marked RD usually shows a monthly installment going into your recurring deposit account, often by auto debit from your savings account.
Can I withdraw part of the money from an RD?
Partial withdrawal is generally not allowed. At the post office you can take a loan against the balance after 12 installments, or close the account after three years at a lower rate.
Is RD better than FD?
Neither is better for everyone. An FD needs a lump sum and earns interest on all of it from day one. An RD lets you build a sum in small monthly steps. Compare the rate, term and your cash flow, or ask your bank.
Is RD interest tax free?
No. Tax applies to it at your income slab. Banks may deduct TDS above the yearly limit; the post office does not deduct TDS on RD interest.
Official sources
- India Post: savings schemeswww.indiapost.gov.in
- Reserve Bank of Indiawww.rbi.org.in
- Income Tax Departmentwww.incometax.gov.in
Rules, amounts and portals can change. Check the official source before you apply or deposit.