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Recurring Deposit Revised Interest Rates

IndianMoney.com Research Team | Posted On Tuesday, February 19,2019, 04:13 PM

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Recurring Deposit Revised Interest Rates

 

 

What Is Recurring Deposit?

Recurring Deposit is an investment option offered by banks and financial institutions in India, that helps people with regular income, deposit a fixed sum of money, periodically into their recurring deposit account RD, and earn interest at the applicable rates. Usually, interest rate of recurring deposit is equal to that of fixed deposit.

Recurring Deposit offers a customer the opportunity to build his/her savings, through regular monthly deposits of fixed amounts, over a period of time. Duration of recurring deposit varies from six months to ten years.

SEE ALSO: Types of fixed deposits

Investing into RD: Is it Really Beneficial?

Investing in recurring deposit is beneficial if you want to invest periodically. Following are the Benefits of RD:

  • Useful for Planning Short Term Goals: Investing in RD is considered risk free and offers assured returns. Investing in mutual funds and equity shares is not a good option, if you are looking for an investment to achieve a short term financial goal. Investing in RD is the best available option, if you are planning to raise funds for a short term goal of say 3-4 years and you don’t have the money immediately, to invest in an FD. Recurring deposit would be the ideal investment scheme, if you are planning to raise funds for the below mentioned reasons:
  • Annual tuition fee for children
  • Planning to fund your higher education
  • Renovating and furnishing of house
  • Exotic vacation
  • Arranging funds for a wedding.
  • Online Recurring Deposit Features: Most popular banks and financial institutions are offering the online recurring deposit feature. This makes deposits easy and hassle free. Customers can open and close recurring deposit accounts online, update information, view passbook and many more account related operations, completely online. Almost all the operations on recurring deposit account can be made online without having to visit the branch.
  • Recurring Deposit Interest Rates: Generally, the interest rate on recurring deposit depends directly on the tenure of investment. It also depends on the amount of investment and the bank. Usually, the interest rate on recurring and fixed deposits is equal. Currently, the recurring and fixed deposit interest rate, hovers around 5 - 9%. Most banks and financial institutions offer higher interest rate on RD for senior citizens. You can use RD calculator on the banks’ official website to calculate the approximate returns on your investment in a recurring deposit account.  
  • Ease of Investment: Fixed deposit, considered a safe investment option, is for those having a lump sum amount. Not everyone would have a lump sum to invest in fixed deposit, which offers higher returns than a normal savings bank account. This is when recurring deposit comes handy.

Recurring deposit is an option for those having constant regular income on monthly basis. Interest rate offered on RD is almost equal to that of an FD. Salaried individuals can allocate a fixed amount to invest in RD each month. Moreover, RD comes with assured returns and the interest rate on RD is fixed and is not affected by the fluctuations in interest rates.

  • Flexible Recurring Deposit: Generally, you would be levied a penalty, if you don’t deposit the fixed amount within the due date. There are a few banks and financial institutions that don’t levy any penalty on late or missed deposits. There are banks that allow withdrawal of RD, within the premature date without levying penalties on the interest earned.

SEE ALSO:Investing in Fixed Deposits

Tax Benefits on RD:

One disadvantage of investing in RD is that it does not offer any tax benefits. Interest earned on recurring deposit is added to your income and taxed as per your income tax slab. Tax deduction at source TDS, is applicable at 10% on the interest earned, if the total interest accumulated exceeds Rs 40,000 over a single financial year.

RD Interest Rate Calculator

Interest on a recurring deposit is usually compounded on a quarterly basis. The formula to calculate is as shown below:

M = R [(1+i)^n-1]/(1-(1+i)^(-1/3) )

In this,

M = Maturity amount at the end of term

R = Deposits made each month

n = Number of quarters

I = Interest rate/400

If you make an investment of Rs 8,000 each month for a year in RD and the interest rate offered is 7%, then total value at the end of investment tenure is calculated as shown below:

R = 8000
n = 4 (one year has four quarters)
I = 7/400

M = Rs 99,697 in one year.

The table below shows the interest rate offered by popular banks on RD:

Bank

Interest Rates

Senior Citizen Rates

SBI Recurring Deposit

6.80% - 6.85%

7.30% - 7.35%

HDFC Bank Recurring Deposit

6.25% - 7.40%

6.75% - 7.90%

ICICI Bank Recurring Deposit

6.25% - 7.50%

6.75% - 8.00%

Axis Bank

7.00% - 7.60%

7.35% - 8.25%

Kotak Bank

6.50% - 7.30%

7.00% - 7.80%

IDFC Bank

6.75% - 7.25%

7.25% - 7.75%

Bank of Baroda

5.75% - 6.85%

6.25% - 7.35%

Citibank

6.00% - 7.50%

6.50% - 8.00%

IDBI Bank

6.00% - 7.05%

6.50% - 7.55%

Indian Bank

6.00% - 6.75%

6.50% - 7.25%

Indian Overseas Bank

5.75% - 6.80%

6.25% - 7.30%

PNB

6.25% - 6.75%

6.75% - 7.25%

Allahabad Bank

6.50% - 6.75%

0.00% - 0.00%

Andhra Bank

6.26% - 6.80%

6.76% - 7.30%

Bank of India

6.25% - 6.70%

6.75% - 7.20%

Bank of Maharashtra

6.00% - 6.60%

6.50% - 7.10%

Canara Bank

6.20% - 7.00%

6.70% - 7.50%

Central Bank of India

6.20% - 7.00%

6.70% - 7.50%

Dena Bank

6.25% - 6.75%

6.75% - 7.25%

Punjab and Sind Bank

6.25% - 7.00%

6.75% - 7.50%

UCO Bank

6.70% - 6.75%

0.00% - 0.00%

Union Bank of India

6.50% - 6.85%

7.00% - 7.35%

Yes Bank

7.00% - 7.25%

7.50% - 7.75%

DHFL

8.00% - 8.00%

8.40% - 8.40%

Syndicate Bank

6.50% - 6.80%

7.00% - 7.30%

South Indian Bank

6.50% - 7.60%

7.00% - 8.10%

Bandhan Bank

6.40% - 7.55%

7.15% - 8.30%

RBL Bank

7.15% - 8.05%

7.65% - 8.55%

Lakshmi Vilas Bank

6.50% - 8.00%

7.00% - 8.60%

Karur Vysya Bank

6.75% - 7.00%

6.75% - 7.50%

IndusInd Bank

7.25% - 8.00%

7.75% - 8.50%

Corporation Bank

6.50% - 6.80%

7.00% - 7.30%

DBS Bank

5.75% - 7.50%

5.75% - 7.50%

Which is the Best RD – How to Choose

Today, most banks and financial institutions offer recurring deposit schemes in India. It is quite obvious that you would be indecisive in choosing the bank or financial institution, while opening a recurring deposit account.

In this scenario, you must go to that bank or financial institution that offers highest interest rate for the investment and tenure. It is good to invest in that bank or financial institution that levies minimum penalty on premature RD withdrawals.

SEE ALSO:Fixed Deposit Interest Rates 2019

Documents Required

Generally, most banks and financial institutions mandate that investors must possess PAN card, to open a recurring deposit account. You would be asked to produce a valid document for identity and address proof.

Below mentioned documents are accepted as valid document for identity proof:

  • PAN card
  • Aadhaar card
  • Voter ID
  • Valid passport
  • Valid driving license
  • Ration card
  • Senior citizens’ ID card

Below mentioned documents are accepted as valid document for address proof:

  • Telephone bills
  • Gas connection bills
  • Water supply bills
  • Electricity supply bills
  • Attested bank passbook

Premature Withdrawal of RD

Most banks and financial institutions levy penalties on premature withdrawals of recurring deposit. Penalties levied would be on the interest earned and not on the principal invested. Most banks and financial institutions don’t allow investors, partial withdrawals from recurring deposit accounts.

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