Variable Recurring Deposit
A variable recurring deposit is a recurring deposit where the monthly instalment can change. You fix a core amount when you open the account, then pay that amount or more each month, up to the bank’s ceiling. The tenure is fixed. The instalment moves, and at one bank so does the rate on the extra money.
Two things decide whether this account helps you, and neither is obvious from a features list. The core amount is a floor you cannot go below, not a target to aim at. And when you pay in matters as much as how much, by more than most savers expect.
Dhanvantri Capital Services Private Limited, known as Dhanvantree, is an AMFI-registered mutual fund and Specialised Investment Fund distributor, ARN-194216, and a distributor of portfolio management services registered with APMI, APRN10201. This page is general information, not a computation of your position.
What a variable recurring deposit is
A regular recurring deposit asks for the same amount every month, and a missed instalment may attract a penalty under the bank’s terms. The variable version removes that rigidity. You commit to a core amount, then pay anything from that figure up to the bank’s ceiling in any given month.
For someone on a fixed salary, the plain version works.
It works less well for anyone whose income moves. A shopkeeper, a freelancer, a farmer, a commission earner. Their good months and lean months do not match a fixed instalment.
The variable version was built for that. Banks sell it under their own names. Indian Bank calls it a Variable Recurring Deposit, shortened on its forms to VRD. Union Bank of India calls it Union Monthly Plus. Punjab National Bank calls it Kalpnidhi Plus. Canara Bank calls it Canara Dhanvarsha. The core idea is shared; the rules around it are not.
For how an ordinary recurring deposit works, see recurring deposits in India.
The core amount is a floor, not a target
Core amount is the smallest instalment the bank will accept once your account is running. It is also the figure the ceiling is calculated from at three of the six banks here. Getting it wrong is what turns a flexible account into a rigid one.
When you open it, the bank asks for a core amount. Most people name the figure they hope to save each month. That is the wrong way round.
At schemes that enforce a core amount as a monthly minimum, it sets two things at once. It is the floor, so you must pay at least that much every month. Union Bank of India states the monthly investment “shouldn’t be less than the core amount”. It also sets the ceiling, because Union Bank of India, Punjab National Bank and Karur Vysya Bank all cap the monthly instalment at ten times the core.
Set the core at ₹5,000 and your range is ₹5,000 to ₹50,000. In a month where money is short, ₹5,000 is still due.
Set the core at ₹1,000 and your range is ₹1,000 to ₹10,000. A lean month costs you ₹1,000. A good month still lets you put in ₹10,000.
The second account is the more flexible one, and it is the one most people fail to open. Work out the lowest amount you could pay in your worst month of the year. Make that the core.
Which banks offer a variable recurring deposit
Six banks run a scheme of this type, and every figure below comes from the bank’s own page rather than a comparison site. The rules that differ most are the monthly minimum, the ceiling on extra deposits, the tenure, and which rate applies to money paid in later.
| Bank | Scheme | Monthly Minimum | How Much More You May Pay | Tenure | Delayed Instalment |
|---|---|---|---|---|---|
| Indian Bank | Variable Recurring Deposit | ₹500 initial, then multiples of ₹100, up to ₹1 lakh | Later instalments up to ₹10 lakh a month | 3 years | No penal interest |
| Union Bank of India | Union Monthly Plus | ₹100 core | Up to 10× core, capped at ₹1 lakh a month, never below core | Not stated on the bank page | Not stated |
| Punjab National Bank | Kalpnidhi Plus | ₹100, then multiples of ₹1 | Up to 10× the core monthly deposit | 6 to 60 months | No penalty |
| Canara Bank | Canara Dhanvarsha | ₹500 a month | Up to ₹1 lakh a month, in multiples of the regular instalment | 1 to 10 years, in multiples of 3 months | No penalty |
| Karur Vysya Bank | Money Mala Plus | ₹1,000, then multiples of ₹1,000 | Up to 10× core or ₹2 lakh, whichever is lower | 12, 24 or 36 months | No penalty charge |
| Bank of India | Star Flexi Recurring Deposit | ₹500 metro and urban, ₹100 rural and semi-urban | Any multiple of the core, no stated upper limit | 12 months to 10 years | Per the bank’s RD rules |
Where a bank does not publish a figure, the cell says so rather than borrowing a number from a comparison site.
Three differences matter more than the table suggests.
Which rate applies to the extra money. At most schemes the rate is fixed for the account on the day you open it, so a rate rise later does not reach you. Bank of India works differently. Its scheme page states that core instalments carry the rate “as applicable for the period for which the A/c is opened”, while flexi instalments carry the “applicable rate at the time of deposit”. The extra money you pay in gets whatever the rate is that month.
Whether a ten-times ceiling exists at all. Union Bank of India, Punjab National Bank and Karur Vysya Bank use one. Canara Bank caps the month in rupees without a core multiple. Bank of India publishes no upper multiple.
How interest is calculated. Canara Bank calculates interest on top-up amounts on a daily-product basis. Karur Vysya Bank calculates daily and compounds quarterly. Punjab National Bank pays half-yearly on a daily-product basis. Ask which method applies before you trust any maturity figure, including the one below.
One naming point. Punjab National Bank’s page carries two names for the same product. The heading reads Kalpnidhi Plus (Flexi Recurring Deposit); the page title reads Swechha Jama Yojna/Flexi RD Scheme. Branch staff may know it by either.
Indian Bank's VRD, and what the comparison sites get wrong
Indian Bank publishes its VRD terms on its own site, and several widely read comparison pages contradict them. Two figures are reported wrongly often enough to name: the minimum deposit and the tenure. Anyone planning around the comparison-site version will plan around a tenure the bank does not offer.
What the bank states:
- Initial deposit of ₹500, or in multiples of ₹100, up to ₹1 lakh
- Later monthly instalments may vary, up to ₹10 lakh a month
- Tenure of 3 years
- Quarterly compounding, with an extra 0.50% a year for senior citizens
- No penal interest on a delayed instalment
- Loan facility and nomination available
| Figure | Comparison Site | Indian Bank’s Own Page |
|---|---|---|
| Minimum deposit | ₹25 | ₹500 initial |
| Tenure | 12 to 120 months | 3 years |
What large comparison sites print instead:
The tenure error is the one that costs money. Someone who opens the account expecting to close it at 12 months is opening a three-year commitment.
The same page also quotes ₹1 lakh in one sentence and ₹10 lakh in another. On the bank’s page these are two different limits, not a contradiction: ₹1 lakh caps the initial deposit, ₹10 lakh caps later monthly instalments.
Check the figures on Indian Bank’s own scheme page before you open the account.
What deposit timing is worth
Timing changes the maturity value of these accounts by more than most savers expect. Money paid in early earns interest for longer. On a fixed recurring deposit there is nothing to decide, because every instalment is the same size. Here you choose the size of each one, so the effect becomes visible.
This is a model, not a bank quotation. Assumptions: ₹1,80,000 total, 36 months, 6.50% a year, compounded quarterly, each instalment paid at month end. A real payout depends on your bank’s instalment dates, its calculation method and its rate terms.
| Pattern | Months 1–12 | Months 13–24 | Months 25–36 | Maturity | Interest |
|---|---|---|---|---|---|
| Flat | ₹5,000 | ₹5,000 | ₹5,000 | ₹1,98,055 | ₹18,055 |
| Front-loaded | ₹8,000 | ₹5,000 | ₹2,000 | ₹2,03,159 | ₹23,159 |
| Back-loaded | ₹2,000 | ₹5,000 | ₹8,000 | ₹1,92,950 | ₹12,950 |
The front-loaded pattern returns ₹10,209 more than the back-loaded one. Not a rupee more was deposited.
Two things follow. If your income is seasonal and the big months come early, the account pays you for that. And the front-loaded pattern needs a low core amount, because month 36 pays only ₹2,000. At a bank that enforces the core as a floor, a core of ₹5,000 makes this pattern impossible.
Tax on a variable recurring deposit
Interest from the account is taxed at your slab rate, the rate for your income band, with no concessional rate of the kind equity gains get. Banks deduct TDS, meaning tax deducted at source, at 10% once your interest from that bank crosses ₹50,000 in a year, or ₹1,00,000 if you are a senior citizen.
The points that matter:
- The threshold is per bank, not per account. The bank applies it to the total eligible interest it pays you in the year, across every deposit and every branch.
- Without a PAN on the account, the general rate is 20% rather than 10%.
- TDS is not the final tax. If your slab rate is 30%, the rest is yours to pay.
- Interest is taxable as it accrues each year, not only when the deposit matures. The bank’s annual interest certificate shows the accrued figure. Form 16A, the TDS certificate, is issued quarterly, so the two documents do not line up one to one.
- One deduction exists, with narrow conditions. A resident senior citizen on the old tax regime may deduct up to ₹50,000 a year of bank deposit interest. The new regime does not carry it.
- Forms 15G and 15H were replaced by a single Form 121 for tax years beginning on or after 1 April 2026. It is a declaration that no tax is payable on your total income, not an exemption. The conditions are not identical for everyone. The declaration made on the old Form 15G, by people under 60, carried an extra test on the amount of interest; the Form 15H route for senior citizens did not. Check your position before filing it.
A ₹1,80,000 deposit of the kind above earns between ₹12,950 and ₹23,159 across three years. Spread over three years, that alone stays under the ₹50,000 threshold. It is not the deciding figure, though, because the bank adds every other deposit you hold with it before testing the threshold.
For how deposit interest sits inside your return, see income tax on investments in India.
Missed instalments and closing early
Four of the six schemes state in writing that a delayed instalment carries no penalty: Indian Bank, Canara Bank, Karur Vysya Bank and Punjab National Bank. Late payment is the forgiving part. Default and closure are not, and those terms differ sharply between the same six banks.
If you stop paying. Karur Vysya Bank publishes the hardest rule of the six. Four consecutive unpaid core instalments close the account automatically, at the applicable rate less 1% penal interest. The same happens if less than ₹12,000 reaches the account in a year. Other banks do not publish a comparable trigger, which is not the same as not having one.
If you close early. This varies most of all. Canara Bank states “No penalty for premature withdrawal”, and pays the lower of the rate for the period the money actually stayed or the contract rate. Karur Vysya Bank pays 1% below the rate applicable for the period held. Indian Bank lists a foreclosure penalty without publishing the figure.
Read the premature closure clause before you sign. It varies more between these banks than the interest rate does.
Who it does not suit
Flexibility here comes with a cost, and for some savers that cost outweighs it. The account asks you to decide an amount every month, twelve times a year. A fixed recurring deposit, once set up with a standing instruction meaning an automatic monthly transfer, asks nothing after the first visit.
Three cases where the plain version does more for you:
- Steady monthly income. A salary that does not move needs no option to vary.
- Money needed inside a year. A scheme with a long fixed tenure, or an unfavourable premature closure rule, is the wrong container for short-term money. Indian Bank’s three-year term cannot be shortened; Canara Bank’s one-year minimum can.
- A history of skipping. The low floor that makes the account flexible also makes it easy to pay the minimum every month and reach maturity with far less than you planned.
Frequently Asked Questions
Yes, down to the core amount you fixed at the start. Below that, the bank treats the month as a default. Union Bank of India’s published rule is that the monthly investment “shouldn’t be less than the core amount”. This is why the core should be the lowest figure you could manage, not the highest.
There is no single rule. Union Bank of India, Punjab National Bank and Karur Vysya Bank use a ten-times-core ceiling, with Union Bank also capping the month at ₹1,00,000 and Karur Vysya Bank at ₹2,00,000. Canara Bank caps the month at ₹1 lakh without a core multiple. Bank of India publishes no upper multiple. Indian Bank allows up to ₹10 lakh a month after the initial deposit.
No, the card rate for the tenure is the same. What the rate attaches to differs by bank. Most schemes fix it for the whole account on the day you open it. Bank of India applies the rate prevailing on the day each flexi instalment is paid in.
Three years. Comparison sites listing 12 to 120 months are not reporting the bank’s published terms.
Yes, at 10%, once interest from that bank crosses ₹50,000 in a financial year, or ₹1,00,000 for a senior citizen. The figure combines interest from all your deposits at that bank. Without a PAN, the general rate is 20%.
Several banks allow it, and the margin differs. Canara Bank states up to 90% of the available deposit balance. Karur Vysya Bank states 75% of the core and flexi amount paid, at 2% above the rate payable on the deposit. Indian Bank and Union Bank of India list a loan facility without publishing the limit.
You need a savings account at the same bank, completed KYC, which is the bank’s identity check, and a core amount worked out from your worst month. Some banks allow it through net banking, others only at a branch. Add a nomination on the form; it takes one line and saves your family a long process later.
They answer different questions. A deposit return is not linked to market movements, and bank deposits carry DICGC insurance of ₹5 lakh per depositor per bank, counting principal and interest across all accounts held in the same right and capacity. A systematic investment plan buys mutual fund units, and its value moves with the market. The choice is yours.
Disclaimer: The views expressed here are of the author and do not reflect those of Dhanvantree. Mutual funds are subject to market risks, please read the scheme documents carefully before investing.