Recurring Deposit (RD) is a popular personal savings scheme offered by banks and Post Office in India- mainly aimed at low income groups/ small investors. Under this scheme, an investor deposits a fixed sum of money at periodic intervals – usually monthly – for a pre determined period – anything from 6 months to 10 years and the Bank / Post Office at the end of the RD maturity period returns the entire deposits together with the interest earned on such deposits. Interest on Recurring Deposit is normally compounded at monthly or quarterly frequencies.
You can use RD Calculator to calculate Recurring Deposit maturity amount for any given values of monthly deposit payment, tenure of Recurring Deposit and interest rate. The interest compounding frequency can also be selected as desired – Monthly or Quarterly.
Explanation : This calculator will calculate the return generated by one time investment in some product .
Example : If you have invested 10,000 and current value is 50,000 and the total tenure was 10 yrs, then the return generated was 17.462% compounded annually .
Confusion of returns by mixing POMIS along with RD ?
There are some claims which says one can invest the monthly income coming from Post office monthly income scheme in to the Post office RD and earn a return of 10.5% . This at first looks amazing , but its kind of untrue and marketing gimmick . I did a XIRR analysis of the whole cash flows and found out that considering everything , your final and actual return is just 8.77% , which means that when you invest your money in POMIS , direct all the monthly income to an RD and at the end when you get the maturity amount along with the bonus of 5% , in total you have made an annual return of just 8.77%, which is quite ok considering the safety and conservativeness of the product. But consideing the tax to be paid at the end of the tenure , again you might not get great Real Returns ! , Remember that the RD comes for the 5 yrs , but it can be extended for 1 more year and it can be made for 6 yrs .