Building a deposit month by month
A recurring deposit accepts a fixed monthly sum at a rate fixed for the whole term. It suits regular income better than a lump-sum deposit, and it removes the decision about when to invest.
Each instalment earns interest only from the month it arrives, so the first payment earns for the full term and the last for barely a month.
The formula behind the number
Two things grow at once: the sum already invested, and each new contribution from the moment it arrives. Together they give:
Here P is the opening balance, M the monthly contribution, i the monthly return and n the number of months. The second term is why contributions made early matter more than contributions made late: each one is multiplied by growth for every month it remains invested.
Worked example: ₹5,000 a month for 5 years at 7%
The calculator opens on ₹5,000 every month and nothing to start with, at 7% a year for 5 years.
- Total paid in: ₹300,000
- Ending balance: ₹357,965
- Growth: ₹57,965, which is 19% of what you contributed
The growth is modest relative to the contributions, which is expected: the average rupee here has been invested for only half the term.
Why the second half does the heavy lifting
At the halfway point, after 2 years, the balance is ₹163,406 — around 46% of the final figure, not half of it.
| Year | Paid in | Growth | Balance |
|---|---|---|---|
| 1 | ₹60,000 | ₹1,963 | ₹61,963 |
| 2 | ₹120,000 | ₹8,405 | ₹128,405 |
| 3 | ₹180,000 | ₹19,651 | ₹199,651 |
| 4 | ₹240,000 | ₹36,046 | ₹276,046 |
| 5 | ₹300,000 | ₹57,965 | ₹357,965 |
Compare this against a lump sum of the same total. The lump sum earns considerably more, because every rupee is invested for the full period.
What starting late costs
Delay by 1 year and, contributing at the same rate, you end with ₹276,046 instead of ₹357,965. That is ₹81,918 less for ₹60,000 of skipped contributions — the gap is the growth those early payments would have earned.
How sensitive is this to the return
The rate is an assumption, not a fact, so it is worth seeing the range. Two points higher gives ₹377,121; two points lower gives ₹340,030. Since instalments are staggered, a rate change part way through affects only the months that follow it on most products.
What this calculator leaves out
Tax on interest, the penalty for missing instalments, and the reduced rate applied if the deposit is closed early.
Recurring deposit against a lump sum
The same ₹300,000 placed as a single deposit at 7% for five years reaches about ₹424,000, against ₹355,500 here. The difference is not the rate — it is identical — but the time each rupee spends invested.
That does not make the recurring deposit worse. It is the right instrument when the money arrives monthly rather than all at once, which for most salaried savers is the actual situation.
Related calculators
- Fixed deposit calculator — the lump-sum comparison
- SIP calculator — the market-linked equivalent
- Annuity future value — the general formula behind this