Recurring Deposit Account Take a step towards your goals with hassle-free investments every month Build a habit of regular savings by opening Recurring Deposits and earn a higher interest rate on your savings. Recurring Deposit Open a recurring deposit (RD) account online with ICICI Bank and save up consistently and conveniently from today, so you can reap benefits tomorrow. With our RD facility, you can keep a track of your recurring transactions, avail a loan against your account and do so much more.

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A Recurring Deposit, commonly known as RD, is a unique term-deposit that is offered by Shriram City Union Finance Ltd. Recurring deposits enable you make regular deposits and earn best in segment returns on the investment. Due to the regular deposit factor and an interest component, it often provides flexibility and ease of investments to. A Recurring Deposit (RD) may be the answer for you. You can make small contributions at regular intervals and get rewarded with interest on your savings. We at HDFC Bank strive to provide you with the best facilities for all your financial needs at your convenience.

Recurring Deposit Meaning

An RD (Recurring Deposit) is a special type of term deposit offered by the banks and post office which lets people deposit a specific amount every month into their RD account and earn returns at the rates offered for FDs. It is similar to initiating an FD of a specific amount in monthly installments. This scheme matures on a specific future date along with all the deposit amounts made every month. This scheme allows individuals an opportunity to build up their savings through regular monthly deposits of a fixed amount over a fixed tenure. The minimum tenure for an RD is generally 6 months and the maximum varies from institution to institution. RDs can be funded by standing mandates which are the orders by depositors to the bank to withdraw a specific amount from their current/saving account and credit to the recurring deposit account.

How RDs Work?

One can consider RDs as one of the simplest forms of investment. Let’s take an illustration for better understanding.

Let us assume that X wants to invest Rs 1,000 per month. He/she can either walk into any branch of a bank or post office or open an account online. If one opts to deposit Rs 1000 every month for a tenure of 12 months, then he/she will get a sum of Rs. 12,000 along with the accumulated interest at the maturity of the RD.

The depositors can plan to save for their future financial goals by using RDs. For instance, if one requires a lump-sum amount of Rs 1,00,000 after 1 year. Therefore, he/she can save around Rs. 8000 each month and make a deposit into the RD account. This way he/she will also earn interest on the amount.

WHY RD (Recurring Deposit)?

1. Higher rate of interest than savings account:

Interest rates here are identical to the interest rates offered in the fixed deposits. And generally, it is observed that RD fetches a higher return when compared to saving bank accounts.

2. Flexibility to invest on a monthly basis:

Unlike Fixed Deposits, investors can go for regular deposits. This is ideal for those who do not have a big amount of funds with them but have the capacity to save a decent amount of money regularly.

3. Guaranteed Returns:

RD is one of the safest investment options available. Since the market is not linked, a disturbance in the economy won’t affect the depositor’s returns. They will receive a profit on the rate promised to them at the time of initiating the RD. However, some of the RDs with lower-rated financial institutions & banks can be risky and therefore depositors must give attention to the credit ratings of institutions before making a deposit.

4. Short deposit tenure:

Investing in an RD gives one the option to go for a shorter duration. This leads to better liquidity and is ideal for those who want to target their short-term goals efficiently.

ELIGIBILITY

1. Any Individual
2. Any minor (above the age of 10 years) is eligible to initiate an RD, provided he submits the proof of name.
3. Any minor (of the age 10 years or less) can initiate an RD under the guardianship of a legal or natural guardian.
4. Any Company, Corporate, Govt Organisation, Proprietorship, or Commercial Organisation is eligible to open an RD account.

DOCUMENTS REQUIRED

1. Identity proof: PAN/Aadhar/License
2. Duly filled and signed application form of the bank
3. KYC documents (if needed)
4. Passport size photograph

KEY FEATURES

1. Deposit Term:

The minimum tenure starts at 6 months. One can choose a suitable tenure according to the convenience stretching up to 10 years.

2. Interest Rate:

The returns offered here are always more than the savings bank account. The interest rates are also identical to that of FDs.

3. Minimum Investment:

The minimum investment amount differs from bank to bank. One can open this account with an amount as mere as Rs. 10.

4. Withdrawal on maturity:

Withdrawal from RDs is allowed only after it attains maturity. However, if one chooses to withdraw the amount before the maturity tenure, it attracts a penalty.

Recurring Deposit Sbi

5. Loan against deposit: The depositor is also offered an option to avail of a loan against the RD. Banks may allow up to 95% of the deposit amount as a loan against the deposit to be used as security/collateral.

6. Standing instructions for monthly deposits:

If one finds it inconvenient to deposit the amount periodically, banks also facilitate such payments as deductions from a linked account (current or saving) upon standing mandate or instructions.

TYPES OF RD

Apart from the regular RDs that one can invest in to earn returns and grow the corpus, RDs are also available in other types, ideal for different investors. Let’s have a look.

1. RD for senior citizens:

The scheme for senior citizens brings higher returns than regular accounts. The interest is compounded quarterly as per the applicable returns, thus facilitating senior citizens to withdraw a higher maturity corpus and meet their short-term funding needs efficiently in the absence of a regular source of income.

Generally, the additional returns offered by various institutions on the senior citizen RD scheme range between 0.25% and 0.75% p.a. above the regular rates.

2. RD for NRI/NRE:

RD schemes are one of the best investment options for Non-Resident Indians i.e. NRIs. Decent returns through investment can be generated with a small recurring deposit every month. As an NRI, one can invest in RDs either through an NRO or NRE RD account.

3. Flexi RD:

These schemes allow an individual to invest a flexible amount as per one’s convenience. In this type of deposit, while the core investment amount is pre-decided, the depositor has an option to deposit amounts in multiples of the core principal amount.

RATES ACROSS TOP BANKS AND POST OFFICE

TAXATION OF RD

Just like an FD scheme, returns earned on an RD deposit are added to the annual income of the investor. This income goes to the ‘Income from Other Sources’ head and is fully taxable as per the applicable income tax slab rate.

No tax is levied if income earned from bank or post office deposits amounts to Rs. 40,000 or less. But if it goes beyond the Rs. 40,000 limit, banks charge 10% as Tax Deducted at Source i.e. TDS.

PREMATURE WITHDRAWAL OF RD

1. If the depositor withdraws the amount before it matures, the rate of return will be the one applicable to the period for which the deposit has remained with the institution. Generally, for premature withdrawals in RDs, a 1% penalty will also be levied.
2. However, some institutions would deduct a penalty of 1% to 2% from the applicable interest rate for the period during which the deposit remained in the bank in case of premature withdrawals.
3. Generally, the minimum lock-in period for a Recurring Deposit account is 3 months. If a premature withdrawal is made before this period, the depositor would earn zero interest and only the principal amount that was deposited would be refunded to him/her by the bank.
4. In addition to a penalty on interest, the depositor is not eligible for incentives offered by the bank on the RD.

More Information:

Understand the Difference Between FD and RD
RD vs SIP - Risk, Returns, Benefits, Tenure, Comparison, Which is Better Investment
Kisan Credit Card (KCC): Scheme Eligibility, Interest Rate, Loan Fee, Online Apply
Kisan Vikas Patra (KVP) Scheme - Benefits, Interest Rate, Types, Calculation
Post Office Saving Schemes: Types, Plans, Benefits, Who Should Invest
What is Fixed Deposit: Meaning, Interest Rates, Benefits, Risk, Bank fd vs Corporate fd
PM Vaya Vandana Yojana (PMVVY): Scheme Eligibility, Interest Rate, Process to Apply
Best Mid Cap Mutual Funds to Invest in India
Best Multi Cap Funds to Invest in India
Check Latest Post Office Fixed Deposit (FD) Interest Rate

When it comes to making safe, regular investments, Recurring Deposits are one of the best options. Here’s all you need to know about them.

Recurring Deposit Calculator Sbi

The choices in the types of savings instruments available to the public have risen manifold in recent years. However, one investment option that has stayed popular amongst people of all age groups is Recurring Deposit (RD). The main reason for this is that RDs are one of the safest investment instruments available. The following recurring deposit FAQ will resolve some of the most common queries about RD.

What is a Recurring Deposit?

This is a version of a ‘term deposit’ offered by Indian banks. It allows the investors to credit a fixed amount into their Recurring Deposit account on a monthly basis, and earn interest at a rate that varies between 5.25% and 9.50% for a tenure of one year.

The primary benefit of a recurring deposit over an FD is that you can commit to investing a fixed amount every month, whereas an FD relies on a lump sum payment, which many may not be in a position to do regularly.

How does an RD work?

Unlike Fixed Deposit, you can deposit a fixed sum with your Bank or Post Office for a pre-defined term every month. In return, you receive interest at a pre-defined rate, and at the end of the term, the invested capital along with accumulated interest is paid to you.

It is important to remember that, once you start an RD account, the deposit amount and term cannot be altered. Additionally, there are no weekly or quarterly deposit payment options.

What is the amount I can deposit in an RD every month?

Most banks have a minimum deposit amount of Rs. 500, though it can even be as low as Rs. 100. You must also commit to making deposits in multiples of Rs. 500, though some banks may allow deposits in multiples of Rs. 100. It is best to check with your bank what their specific policies are in this regard.

Related:Understanding your savings account

How long is the term of an RD?

The minimum period for almost all RDs is 6 months, and this is extendable by multiples of 3 months up to a maximum permissible period of 10 years (120 months). The benefit that RDs offer is that you can define the length of the term. However, once fixed, that period will also serve as a ‘lock-in’ (usually 3 months) for your investment.

What is the interest rate paid on RDs?

This is one of the most common RD FAQ. The interest rate offered on RDs is directly correlated to the prime rate of the Reserve Bank of India (RBI) and is compounded and credited to the account on a quarterly basis. Rates currently range from 5.25% to 9%.

Senior citizens are eligible for an additional interest rate of 0.25% to 0.75% over and above standard interest rate offered by most banks. You must check this rate with your bank before opening an RD account.

Related:Short term investment options for high returns

Can I redeem my RD before the end of its term?

You can stop your deposits at any time and even redeem your investment when you want to. However, you could incur a small penalty (usually 1% of the interest earned) for cancelling your recurring deposit prematurely. This penalty will be defined at the time of opening the RD. However, the principal money invested is not affected under any circumstances.

Do RDs have a nominee/beneficiary facility?

Yes, all such deposits have a nominee or beneficiary assigned to the account. You can also change the nominee at any time by filling in the appropriate paperwork with your bank.

Can an RD be opened for a minor, or as a joint account?

Yes. You can open an RD account for a minor (child below 18 years) and even with someone else, as a joint account.

Does a Recurring Deposit account offer benefits to senior citizens?

The primary benefit to senior citizens is an additional interest rate which varies from 0.25% to 0.75%. This rate is paid to those who have reached or crossed 60 years of age.

Related:Are you making the most of your savings account?

What happens if I delay the monthly deposit payment?

When you open an RD account, you are informed about the maturity value under the assumption that the monthly instalments will be deposited on the due date. A delay of even one day will mean that the interest penalty will apply for the whole month, or there could be a cash penalty that is a proportion of the monthly deposit. Either way, it affects your payout on maturity to some extent.

If you default on your monthly instalments frequently and have six outstanding instalments, some banks reserve the right to close the RD account. The interest rate payable will be as per the premature redemption aspect of the RD agreement.

Can I make partial withdrawals from my RD Account?

No, partial withdrawals are not allowed. Additionally, you cannot ask for periodic payouts of just the interest component. The interest will be paid when the account is either closed prematurely (subject to the early redemption penalty) or on maturity.

What other benefits can you avail of with an RD?

Most banks provide loans of up to 90% of the current deposit value. The interest charged on such loans is also lower than that of a personal loan – usually no more than 1% of the deposit rate the bank is paying on the RD.

This facility comes into its own if the investor requires cash for an emergency, especially since the RD continues to earn interest, and one does not have to pay the penalty for the premature withdrawal of the deposit.

Investors are eligible for tax exemption on Recurring Deposits only if they invest in an RD through India post, and in a 5-year scheme (at least). The maximum taxable deduction, under Section 80C of the Income Tax Act of 1961, is Rs. 1.5 lakh.

Who should invest in RD?

A Recurring Deposit is a good investment option for risk-averse investors as the product offers fixed returns with no risk. It is particularly suited for those who do not have a lump-sum to invest and would rather put money away on a regular basis. Recurring deposits are ideal for people who are looking to meet their short-term goals.

The answers to common queries recurring deposit should make it easier for you decide on the investment. Speak to your bank or local post office to understand the specifics of their service better.