Recurring Deposits
A recurring deposit is a special kind of term deposit offered by banks 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. Failure to remit every month installment wil occur penal Charges.
While the minimum amount of investment is Rs.100 , you can usually start with a considerably small amount, say Rs. 500 every month, as per your budget.
However, the right RD would be the one that allows for a suitable investment amount given your capacity and provides a maturity option that rightly fits your short or long-term funding plans. RD allows you to earn fixed interests on the amount invested at frequent intervals until the investment matures or a pre-determined term ends.The total amount (i.e., the capital invested and the interest accumulated) is disbursed to the investor after the maturity period completes.
Here is a table that provides a brief overview of RD features:
| RD Features | Applicability |
|---|---|
| Rate of interest | Between 5% to 8% (variable for Tenure of investment) |
| Amount of minimum deposit | From Rs. 100 |
| Tenure of investment | Between 12 months and 10 years |
| Frequency of interest calculation | Usually every quarter |
| Mid-term or partial withdrawal | Not allowed |
| Premature account closure | Allowed with penalty |
Withdrawal on maturity
Withdrawal from this account is allowed only after it attains maturity. However, if you choose to withdraw the amount before the maturity period ends, it attracts a premature penalty
Loan against deposit
You also have an option to avail a loan against the RD. Banks may allow up to 90% of the deposit amount as a loan against deposit used as collateral.
Standing instructions for monthly deposits
If you find it inconvenient to deposit the amount periodically, banks also facilitate such payments as deductions from a linked account (savings or current or Cash Credit) upon standing instructions. Interest rates in RD also vary depending on the investor’s age. For instance, senior citizens can enjoy the benefit of higher interest rates as against the existing interest rates for regular RD schemes.
RD for senior citizens
Carrying the same features as a regular RD, the scheme for senior citizens brings higher interest rates than the regular accounts. The interest is compounded quarterly as per the applicable interest rate, thus helping senior citizens withdraw a higher maturity amount and meet their short-term funding needs efficiently in the absence of a regular income. Generally, the additional interest rates offered on senior citizen RD scheme is 0.5% above the regular deposit rates.
- Recurring deposits scheme helps every individual to invest a fixed amount of money on monthly basis.
- Account may be opened by Individuals / Minors / Regd. Co-op. Societies / Regd. Public Trusts / HUFs.
- Nomination facility available and Mandatory.
- Ideal scheme for future investments / commitments .
- Cummulative Interest payable option.
- TDS Deduction will not be done if Copy of PAN with duly filled Form 15G / Form 15H submitted to the Bank as per IT Act
- Monthly savings scheme for period from 12 to 120 months.
- Avail loan upto 90 % of the balance, if need be