Recurring deposits are the mostly procured investment schemes in India. A recurring deposit is very popular amongst the salaried class people because it is affordable and easy to procure and art the same time it also doesn’t require a huge deposit amount. And most of the banks in India irrespective of being private or public offer recurring deposit accounts.
And at name suggests, a recurring deposit calculator is utilised in order to get the maturity value of the recurring deposit. With the help of a simple formula the interest on a recurring deposit account can be calculated obviously with the help of a recurring deposit calculator. Having said that there are some very important things that the customer should pay attention to before he/she calculated the interest.
Customers must be sure to take each month’s installment as a separate deposit and that compounding takes place at the very end of a financial quarter and not at the end of every month. A different amount of interest will be earned at the end of every month. The amount that one gets during the maturity of the recurring deposit is the total of the enhanced value or every month’s deposit.
What is the formula for calculating the recurring deposit?
The compound interest on the recurring deposit amount is added only one the first quarter is completed. This si how the financial quarter in a year is determined:
April to June is the first quarter
July to September is the second quarter
October to December is the third quarter
January to March is the fourth quarter
Compounding happens after every quarter which is why until then a simple interest calculation will take place . This si the simple interest formula
I = Prt
I means interest
P means principal
R means annual rate of interest applicable
T is te tenure of the time period of the scheme
He below is the formula given by the Indian banks association to calculate recurring deposit it ne4rest
M=R [(1+i) n-1]
Where M means Maturity value
R means monthly installment
I means rate of interest divided by 400
And n means number of quarters
Therefore with the above formula if a person deposits Rs 1000 in January, using simple and compound interest formulas he/she will have Rs 12,801.90 as maturity amount at the year end at 12% rate of interest.
How do you calculate compound interest on a recurring deposit?
As has been already mentioned, compound interest is calculated in every quarter and then is added up to the final amount that the customer gets, the formula is:
A = P (1 + r/n) ^ nt
A is the final amount procured
P is the principal amount
R is yearly interest rate
N is the number of times the interest has been compounded each year
T is the tenure of the recurring deposit scheme