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Recurring Deposit Accounts

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Recurring Deposit Accounts

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What is a recurring deposit?

A recurring deposit is similar to an SIP (Systematic Investment Plan), in a mutual fund. You want to invest in a fixed deposit but do not have sufficient money to do so.

A recurring deposit is similar to a fixed deposit, only you invest small sums of money regularly which earns an interest equal to a fixed deposit.

You will have to first open a savings bank account in your bank. You deposit money into this savings bank account.

A fixed sum of money is deducted regularly (say each month), from your saving bank account and transferred to your recurring deposit.

Why invest in a Recurring Deposit Account ?

You can start small

Find investing a large amount in fixed deposit difficult? Invest small sums of money and earn interest at the same rate as a fixed deposit.

Rate of Interest is Fixed

The rate of interest is fixed when you invest in a recurring deposit. You are insulated from a swing in the interest rates.

Forced Saving

You invest a fixed amount of money and can withdraw your money, only after a certain fixed time. You are forced to save.

Plan your Goals

You can set money aside for short-term goals such as marriage expenses, buying a car or even going on a holiday.

 
Eligibility for Recurring Deposit Account

If you are a resident of India, you can open a recurring deposit account. A recurring deposit at a bank can be opened with an amount as less as INR 100 a month. Some private banks require you to make a recurring deposit of at least INR 500 a month.

What is the tenure of your recurring deposit?

The tenure of a recurring deposit is a maximum of 10 years. It would be a good idea to invest your money in a recurring deposit which matches your financial goals

Interest on your recurring deposit

Many recurring deposits pay an interest rate of 8.5-8.7% a year. This interest rate can go as high as 9-9.2% a year for a recurring deposit, if you make a deposit of 1-5 years.

How to apply

  • You can apply for a recurring deposit account at your nearest bank branch. You have to fill the application form and submit the relevant documents.

  • You require proof of identity and address: passport/ driving license/ voter's identity card/ PAN card/ ration card/ recent utility bills/ credit card bill. This is necessary for the KYC (Know Your Customer), procedure.

 

Concepts & FAQ's Recurring Deposit Accounts

What is a Recurring Deposit?

The Recurring deposit account is an account in the bank where an investor deposits a fixed amount of money every month for a fixed tenure (mostly ranging from one year to five years). This scheme is meant for investors who want to deposit a fixed amount every month, in order to get a lump sum after some years. The small monthly savings in the Recurring Deposit scheme enable the depositor to accumulate a handsome amount on maturity. Interest at term deposit rates is computable on quarterly compounded basis.

Features of Recurring Deposit Account

  • The main objective of recurring deposit account is to develop regular savings habit among the public.

  • In India, minimum amount that can be deposited is Rs.10 at regular intervals.

  • The period of deposit is minimum six months and maximum ten years.

  • The rate of interest is higher.

  • No withdrawals are allowed. However, the bank may allow to close the account before the maturity period.

  • The bank provides the loan facility. The loan can be given upto 75% of the amount standing to the credit of the account holder.

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Frequently Asked Questions

For what period can I open a Recurring Deposit account?

You can open a Recurring Deposit account for a minimum period of 6 months, and thereafter in multiples of 3 months up to a maximum period of 10 years.

How will an RD account be operated?

A monthly deposit (RD Installment) of a pre-fixed amount is made in the RD account and on maturity; the depositor gets back the amount deposited, along with interest calculated at the rate applicable at the time of opening of RD account.

Is TDS applicable on Recurring Deposits?

No, TDS is not applicable on Recurring Deposits as per Income Tax rules.

Is an overdraft facility allowed on a Recurring Deposit?

Currently, there is no overdraft facility allowed on a Recurring Deposit.

Can more than one installment be paid at any given time?

Yes, but there will be no interest paid on any additional amount deposited other than the installment due.

Will I get a receipt for my Recurring Deposit?

No, you will not get a receipt of your RD however the details of the RD would be updated in your account statement.

Is a Nomination facility available on an RD account?

Yes

Do Senior citizens get any extra benefit on Recurring Deposits?

Yes, most of the companies offer extra benefits in the form of higher interest rates.

Can I redeem my Recurring Deposit before the original term?

Yes. In the event of the Recurring Deposit being closed before completing the original term of the deposit, interest will be paid at the rate applicable on the date of deposit, for the period for which the deposit has remained with the Bank. In case of premature withdrawal the deposit may be subject to a penal rate of interest as prescribed by the Bank on the date of deposit.

Can I change the nominee(s) for my Recurring Deposit?

You can change the nominee(s) during the currency of the accounts with the Bank, by making a declaration effect in the appropriate form prescribed by the company

What are the advantages of Recurring Deposit Account?

  • Recurring deposit encourages regular savings habit among the people.

  • Recurring deposit account holder can get a loan facility.

  • The bank can utilize such funds for lending to businessmen.

  • The bank may also invest such funds in profitable areas.

 

Recurring Deposit Accounts Articles

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Post Office Recurring Deposit Scheme Interest Rates 2020

25 February 2020, Tuesday    

Post office Recurring Deposit account is a savings account offered by the Indian Post Office. It allows investors to save money every month for a pre-specified time period thus allowing investors to save while incurring interest on the deposited amount. RD account can be opened and operated easil ....

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Investing is the best way to grow your surplus funds and generate an income. Two such investment products are RDs and SIPs. Both of them allow investors to grow their money through regular investment instead of a one-time payment. The question here is which one is a better option for you? Let’ ....

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Recurring Deposit Accounts News

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State Bank Of India (SBI) Recurring Deposit Vs SBI Flexi Deposit

Sunday, February 18, 2018, 9:14 AM

State Bank of India offers investors the option of investing their money in recurring deposits (RD) and Flexi deposit accounts. Recurring deposits require customers to pay regular monthly installments for a specific interest rate until a given maturity date. On the other hand, SBI Flexi Deposit account offers flexibility in choosing the deposit amount within the minimum and maximum limits per financial year.
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Thursday, June 15, 2017, 11:41 AM

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Andhra Bank launches mobile app

Wednesday, May 31, 2017, 3:54 PM

Andhra Bank today said it has launched a mobile app for its customers. According to a statement issued by the bank, the app ABTEJ (phase I) was launched by T Hanuman Chowdary, founder of the Telecommunications and Management Studies. "With this mobile banking app, customers can register and activate their mobile banking facility instantly in a more secure way and with the improvised user experience.

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Recurring Deposit Accounts Videos

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RD v/s SIP Which Investment is safe? in Malayalam | RD V / S SIP ഏത് നിക്ഷേപമാണ് സുരക്ഷിതം?

RD v/s SIP Which Investment is safe? in Malayalam | RD V / S SIP ഏത് നിക്ഷേപമാണ് സുരക്ഷിതം?

8 Days Ago

Start your Journey to Become Rich with IndianMoney's Financial Freedom App, Download here: https://indianmoney.com/ffa/FmCSZ69pHo   Many people are often confused, as to which investment option they should go for: Recurring deposit or SIP? However, one important thing to understand here is, recurring deposit or RD is also a SIP. SIP is a way of investing, whereas RD is an investment option. A systematic investment plan means, paying a particular amount of money at regular intervals of time to an investment option. Recurring deposit on the hand is a special kind of term deposit that allows making regular deposits and earning interest on the same. To clear all your queries regarding RD V/S SIP, watch this video.
RD V/S SIP Which Investment is safe? | (Recurring Deposit vs SIP)

RD V/S SIP Which Investment is safe? | (Recurring Deposit vs SIP)

1 Month Ago

Start your Journey to Become Rich with IndianMoney's Financial Freedom App, Download here: https://indianmoney.com/ffa/FmCSZ69pHo   We all want to save and invest. But often we are confused about which investment option to go for. The availability of numerous options along with a lack of proper information regarding each investment option creates a dilemma. RD and SIP are two investment options people always ponder about. Recurring deposits are a special kind of deposits offered by banks, which help people to deposit a fixed amount every month and earn interest on it. On the other hand, a systematic investment plan is not an investment instrument, rather it is a way of investing. If you want to know which of them is safe and suitable for you, watch this very informative video. 
RD V/S SIP Which Investment is safe? | C S Sudheer

RD V/S SIP Which Investment is safe? | C S Sudheer

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Start your Journey to Become Rich with IndianMoney's Financial Freedom App, Download here: https://indianmoney.com/ffa/FmCSZ69pHo   We wish to be rich which requires more earnings. To earn more money most of us invest. Investing our hard-earned money into any portfolio requires complete knowledge. We have several platforms where we can invest to take out a few names, Recurring Deposits, Fixed deposits, Mutual Funds, Real estate and Stock market, and so on. The most common and known investment platform is RD. Recurring Deposits allows people to deposits regular and fixed some of the amounts for a certain fixed tenure which gives decent returns. Wherein SIP a Systematic Investment Plan as the very name implies it allows an investor to invest a certain amount and a regular basis. RD v/s SIP which is best? Here in this video, C S Sudheer has given complete information on this.

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Recurring Deposit Accounts Education

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What is Recurring Deposit Account?

Friday, February 9, 2018, 8:22 AM

Recurring Deposit is a special kind of Term Deposit offered by banks in India which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits. Minimum Period of RD is 6 months and the maximum is 10 years.

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Wednesday, June 7, 2017, 7:54 AM

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Money tips for couples: #3 Save 20-30% of your joint income

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Saving should always be your first preference after catering to non-negotiable expenses like rent and EMIs. After your necessary expenses, you should save at least 20% – 30% of your joint take home incomes, and this saving needs to be invested appropriately based on your financial goals.

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