Interest rate
RD Interest Rates — Bank-Wise Comparison & Trends
RD rates closely track FD rates of the same tenor — usually within 10–25 basis points. Choose the bank with the cleanest digital instalment auto-debit and the rate edge will follow.
// why rd and fd rates differ slightly
Banks face a slightly different cash-flow pattern on RDs — instalments arrive month after month rather than all at once. This staggered receipt is sometimes priced 10–25 bps lower than the equivalent FD slab, though many banks now offer identical rates.
// what changes the effective yield
Quarterly compounding is standard for RDs in India. A 7% nominal RD for 3 years gives an effective yield of ~7.18% on the first instalment but only ~6.9% on the last (because it compounds for one month). The blended yield is around 7.05%.
// tax handling
RD interest is fully taxable as 'Income from Other Sources' at your slab rate. Banks deduct TDS at 10% if your aggregate RD+FD interest in the year exceeds ₹40,000 (₹50,000 for senior citizens).
// frequently asked questions
Skipping is allowed but invites a small penalty (₹1–₹2 per ₹100 of missed instalment per month). Four consecutive defaults can lead to RD closure with interest reduced to the savings rate for the served tenor.