Every instalment compounds quarterly for as long as it is held — the first for the full term, the last for one month. This is how banks compute an RD.
Maturity value
₹3,59,664
- You deposited
- ₹3,00,000
- Interest earned
- ₹59,664
Year by year
How an RD is actually computed
An RD is not one deposit — it is a series of them. The instalment you pay in month one earns for the whole term; the one you pay in the final month earns for a single month. The maturity value is the sum of every instalment grown for its own holding period, compounded quarterly.
This is why the effective return on an RD always looks lower than the headline rate. Your average rupee has been in the account for about half the term, not all of it. An RD at 7% for five years turns ₹3,00,000 into roughly ₹3,58,000 — an overall gain of about 19%, not 35%.
RD or SIP?
They are the same habit pointed at different risks. An RD pays a contractual rate with no market exposure and is the right home for money you need on a fixed date within a few years. A SIP takes equity risk for a higher expected return and is the right home for money you will not touch for a decade.
Using an RD for a 20-year goal is the more common mistake of the two: a guaranteed 7% loses to inflation more slowly than it looks, but it still loses.
Common questions
Banks typically charge a small penalty per missed instalment and may close the account after several consecutive misses. Not modelled here — the calculator assumes every instalment is paid on time.
Related calculators
Fixed deposit
What a fixed deposit is worth at maturity, compounded quarterly the way banks actually post it.
SIP
Put in what you invest each month and the return you expect, and see what the SIP is worth at the end — split into the money you actually paid in and the growth on top.
PPF
A yearly contribution to a Public Provident Fund account, compounded annually for the full term. See what the account is worth at maturity.