Recurring Deposit Interest Rates:
The interest rate of recurring deposits depends on the bank where you want to open your RD account and the tenure of your deposit. There are special interest rates offered to senior citizens, compared to the regular RDs. Recurring deposit is a popular scheme as it helps build a corpus over a period of time and nurtures the habit of saving regularly.
Recurring deposits are also offered to minors and students. Any special recurring deposit scheme carries a special interest rate. There are also special schemes that are offered to help deposit money and fulfill financial goals. The rate of interest offered depends on the kind of account. The current rate of recurring deposits offered by the banks varies from 4.5% to 7.9% a year.
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The Recurring deposit is an investment scheme offered by banks where you deposit a fixed amount each month for a pre-specified time. The RD account holder can choose the time period and the amount to be deposited. The RD can be availed by all sections of people. A Recurring Deposit helps build up an attractive corpus on maturity and inculcate the habit of saving across all income sectors. Interest rate in this kind of deposit scheme is compounded quarterly. All major Indian banks offer recurring deposit scheme.
There are several factors that affect the rate of interest offered on recurring deposit. They are as follows:
Types of Accounts: The account type makes a difference in the interest rate offered by the bank. If you are holding a regular account, than you get moderate returns on your recurring deposit. For NRE/NRO accounts, the banks offer slightly lesser rate than normal accounts. However, if you are holding a senior citizen recurring deposit account, you are likely to receive better interest rate which is generally higher than normal RD accounts.
Tenure: The tenure of the recurring deposit is one of the most important factors that determine the RD interest rate. A medium term recurring deposit which is a 5 year scheme, generally earns much higher rate of interest than the ones having lower tenure of 1 year to 3 years. Some banks offer highest interest rate on long term deposits of 10 years. However, the rate of interest varies across banks.
Age: Most of the banks offer a higher interest rate for senior citizens. This is done keeping in mind the requirements of the senior citizens, as they no longer have a monthly salary. The rate of interest is usually 0.5% per annum higher than regular bank rates. Accounts opened for minors sometimes receive better interest rates, but this is solely at the banks discretion.
Choice of Bank: This is an important factor in determining interest rates on recurring deposits. Currently the rate of interest offered by nationalized banks varies from 4.75% to 8% a year and is compounded annually. Some banks offer high interest rate on recurring deposits.
Schemes on Offer: Banks have different recurring deposit schemes that are meant for specific purposes. ICICI bank has some special recurring deposits, where you save money for a year for a holiday or purchase of jewellery or electronics. Some schemes like Corporation Bank Millionaire Scheme offer a very high rate of interest at 9.25% a year. So, the choice of schemes impacts the rate of interest of the RD depending on the benefits offered.
Safe Investment: These are one of the safest investment options, as they bear less risk. If you choose to deposit your money with a nationalised bank then your money is safe. Interest remains constant across RD tenure.
Earn While You Safe: You receive interest right from the first deposit. The interest accumulates across the tenure of the recurring deposit. At the time of maturity, the deposit grows to a huge amount, as you enjoy the compounding benefit. The longer you invest, more is the interest you earn.
Lump Sum Payout: At the end of the RD tenure, you receive the principal along with the accrued interest as a lump sum. The amount can be reinvested for another term, or you can use it to fulfill financial goals.
Online Access: Nowadays, majority of Indian banks offer mobile and internet banking facilities. The bank customers have a User ID through which they can access various banking facilities online. You can open bank deposits, make transactions and know your account statement and balance and also keep track of the progress of your deposits. You can also view the rate of interest offered across different schemes and choose the tenure and deposit amount as per your needs. You can continue monthly deposits in recurring deposit accounts through the net banking account.
Loan Offers: When you have an RD with the bank, you sometimes get pre-approved loan offers. In other words, your loan application will be given preference and processing of loans takes less time as you are already a customer of the bank. In addition to this, banks offer lower interest rate on loans as well.
Recurring deposit is a popular scheme among Indians who want risk-free deposits and good returns along with the benefits of saving. In the recurring deposit scheme, the investor deposits a fixed amount each month, for a predefined period of time and the savings earns interest, helping the money grow. However, the interest earned on the recurring deposit investment is liable to taxation. Interest earned on RD is taxed as per tax brackets. A TDS of 10% will be deducted on the interest income above Rs 40,000 a year. It’s Rs 50,000 for senior citizens. The TDS deduction will be 20% in case the PAN Card information is not provided.
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