Recurring Deposits: Banks Are Offering upto 7.6% Interest 

A recurring deposits helps you put a fixed sum of money every month in a bank deposit. It works like a mutual fund SIP but interest is taxable. Here is a list of rates offered for five-year recurring deposits. 

Recurring deposits (RDs) are debt instruments that provide capital guarantees to investors. Banks offer RDs for tenors of one to 10 years. It allows investors to invest a fixed amount every month and build the corpus for short-term needs. It works just like a mutual fund’s systematic investment plan. Investing in RDs brings in discipline. It, however, also requires that you have the required funds to invest every month. Conservative investors who have a regular income stream can look at RDs but do remember that investment in RDs is taxable. Neither the money invested, nor the interest earned is exempt and both are taxed as per the tax slab. 

Several banks have raised interest rates on RDs for 5-year tenor after six consecutive rate hikes by the Reserve Bank of India (RBI) in the FY23, starting from May. The cumulative rate hike is 250 basis points (one basis point is one-hundredth of a percentage point). Smaller private banks lead with the highest interest rates followed by small finance banks. According to data compiled by BankBazaar, here are the top banks offering the best interest rates on RDs for 5-year tenor.  

DCB Bank offers 7.60 percent interest on RDs for a five-year tenor. Among private banks, this bank offers the best interest rates. If you invest Rs 5,000 every month for five years, at the end of the tenor you will get Rs 3.66 lakh. Suryoday Small Finance Bank offers 7.5 percent interest for a five-year tenor. Among small finance banks, Suryoday offers the best interest rates. If you invest Rs 5,000 a month for five years, at the end of the tenor you will get Rs 3.65 lakh. IndusInd Bank offers 7.25 percent interest on RDs for a five-year tenor.

If you invest Rs 5,000 every month for five years, at the end of the tenor you will get Rs 3.62 lakh. AU Small Finance Bank and Ujjivan Small Finance Bank are offering 7.20 percent interest on RDs for a five-year tenor. If you invest Rs 5,000 a month, at the end of the tenor you will get Rs 3.62 lakh.

Leading private banks, which include Axis Bank, HDFC Bank and ICICI Bank, are offering 7 percent interest on RDs for a five-year period. Other smaller private banks, which include IDFC First Bank, RBL Bank and Yes Bank, too, are giving 7 percent interest on RDs for a 5-year tenor. If you invest Rs 5,000 every month, at the end of the tenor you will get Rs 3.60 lakh.  

Small finance banks and smaller private banks are offering higher interest rates to garner newer deposits. The Deposit Insurance and Credit Guarantee Corporation, a subsidiary of the central bank, guarantees investments in recurring deposits of up to Rs 5 lakh. The data on RDs is as of April 5, 2023, as given on bank websites. We have considered the interest rates for a five-year tenor. Banks for which RD rates are not shown on the website are not considered for compilation by Bankbazaar.