Difference between FD and RD

The major difference between FD and RD is that in FD, you invest a lump sum amount once and then wait for it to mature and give you investing benefit after 6 months to a few years. Whereas in RD, you make fixed monthly deposits into the RD account for a predetermined period, typically ranging from 6 months to 10 years. Yes the maximum tenure of taking out an RD is 10 years.

Let’s understand with an example

Step 1: Formula for Maturity amount

Formula: Ai = P * (1 + R/N) ^{N * (t - i-1/12)}

Ai​: Maturity amount for the iii-th deposit

P: Monthly deposit (5000 INR)

R: Annual interest rate (0.07)

N: Compounding frequency (4)

t: Tenure in years (3)

i: Month number

Step 2: Calculate quarterly interest rate

Quarterly Rate: R/N: 0.07/4 = 0.0175

Step 3: Maturity Amount Calculation for 1st Month

A1 = P*(1+0.0175) ^4*3

A1​=5000×(1.0175)12

A1=5000×1.231439

A1​=6157.20 INR

Step 4: Maturity Amount Calculation for 2nd Month

A2​=P*(1+0.0175) ^{4 *( 3 - ½)}

A2​=5000×(1.0175) ^11.6667

A2​=5000×1.224339

A2=6121.69 INR

Step 5: Maturity Amount Calculation for 3rd Month

A3​=P×(1+0.0175) ^{4 * (3 - 2/12)}

A3​=5000×(1.0175) ^11.3333

A3​=5000×1.217267

A3=6086.39 INR

General calculations for all months

Ai = P * ( 1+ 0.0175) ^{4 * (3 - i-1/12)}

Example for the 4th month (i = 4)

A4 = 5000 * ( 1.0175) ^{4 * (3-3/12)}

A4 = 5000 * ( 1.0175) ¹¹

A4​=5000×1.210224

A4=6051.30 INR

Summing up all deposits

To find the total maturity amount, sum the maturity amounts for all 36 monthly deposits a shown above .

Total maturity amount

The total maturity amount will come to 200,686.49 INR

How to use our RD Calculator

1) Slide the scale or directly type the amount you wish to invest monthly for taking up a Recurring Deposit (RD) in your bank.

2) Slide the scale or write the rate of interest you are expecting at the time of investing.

3) Tenure, choose month or year option and accordingly type the desired number.

4) Click on calculate and you will get a summary of the calculation with the Total Maturity Amount highlighted at the end of the table. Click on report button to get a deeper understanding.