by admin | April 6, 2024

A recurring deposit is an extremely popular saving scheme which allows investors to deposit a fixed amount every month and earn interest on the same after the end of the scheme. Due to the lower risk associated with this kind of savings scheme, a majority of people prefer to invest in a recurring deposit with a purpose to create wealth in both long term and short term. 

Recurring Deposit

Recurring Deposit Meaning

Recurring Deposit is also known as RD. it refers to a kind of savings account that acts as an investment tool for investors to make monthly investments and earn interest on the deposited amount at the end of the tenure. 

In general, recurring deposits tend to have more flexibility as compared to Fixed Deposits. Recurring deposits are ideally more adaptable than fixed deposits (FDs), which are inflexible and ideal for those wishing to open a separate account for savings.

Types of Recurring Deposits

In addition to the standard RDs that one can invest in to expand the corpus and receive returns, there are additional types of RDs that are suitable for different investors. Let’s examine this.

RD for Senior Citizens

Senior citizen programs yield greater returns than standard bank accounts. In the absence of a consistent source of income, older folks can effectively satisfy their short-term funding needs and extract a greater maturity corpus thanks to the interest that is compounded quarterly based on eligible returns.

The extra returns that different institutions give on the senior citizen RD program typically vary from 0.25% to 0.75% p.a. above the standard rates.

Flexi RD

With these plans, a person can invest a variable amount according to their convenience. The depositor in this kind of deposit has the choice to deposit amounts in multiples of the core principle amount, even though the core investment amount is predetermined.

NRI/NRE Recurring Deposit

For non-resident Indians, or NRIs, one of the greatest financial opportunities is a retirement savings plan. A little monthly recurring payment might yield respectable returns on investments. An NRO or NRE RD account can be used to invest in RDs as an NRI.

Major Features of A Recurring Deposit

  • As little as ₹100 can be invested each month.
  • The minimum deposit period is for a period of six months to ten years.
  • The interest rate is higher than that of a standard savings account and is compounded weekly.
  • Depending on the bank, RD savings accounts have a lock-in period of either 30 days or three months during which any withdrawals made will not be eligible for interest.
  • As many RD accounts as you wish can be opened.
  • While early withdrawals are permitted with certain restrictions, partial withdrawals are not permitted.
  • Some post offices and banks may accept advance deposits.
  • Rather than making a one-time payment, you can make monthly installments.
  • Senior folks may be eligible for an additional 0.5% interest rate.
  • Deposits do not require manual interaction. Automated transfers from your savings account to your retirement account are possible.
  • There are loan and overdraft options available.
  • A juvenile may open an RD account under the oversight of a parent or guardian.

Working of A Recurring Deposit

  • Once you open a recurring deposit account, you can choose the amount you wish to deposit each month and the tenure for which this deposit will be continued
  • You need to deposit a pre-determined amount every month on a particular date for the chosen tenure, which can vary from 6 months to ten years
  • The interest earned on the investment made is calculated every quarter and is included in deposited amount till date
  • After the maturity period gets over, the deposited amount along with the interest rate would be paid to you

Recurring Deposit Interest Rate Calculation

The recurring deposit interest rates that investors receive vary depending on the type of deposit and program. Moreover, the effective interest rate rises if the interest is compounded quarterly. Investors can use the RD interest rate calculator to learn how to calculate RD interest. Investors can find out how much interest they will earn by inputting the deposit amount, interest rate, and duration.

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Recurring Deposit Interest Rates By Top Banks

Please refer to the following table to know the recurring deposit interest rates for both general public and senior citizens by all major financial institutions in India. 

Bank nameFor General PublicFor Senior Citizens
Yes Bank 4.75% to 6.25% 5.25% to 7.00%
Union Bank4.40% to 5.50% 4.40% to 5.50%
TMB 5.25% to 6.50% 5.25% to 7.00%
South Indian Bank 3.65% to 7.00% 4.15% to 7.50%
SBI 5.40% to 7.00% 6.20% to 6.50%
Saraswat Bank 3.25% to 7.00% 3.75% to 7.50%
PNB 3.50% to 6.50% 4.00% to 7.30%
Post Office 6.2% 6.2% 
Kotak Mahindra Bank  6.00% to 6.20% 6.50% to 6.70%
Karur Vysya Bank 4.06% to 6.03%NA 
Karnataka Bank 4.50% to 5.80% 4.90% to 6.20%
Jammu and Kashmir Bank 3.50% to 6.50% 4.00% to 7.00%
IndusInd Bank 3.50% to 7.25% 4.00% to 7.75%
Indian Overseas Bank4.65% to 5.85% 5.15% to 6.35%
Indian Bank 2.80% to 6.10% 3.30% to 6.60%
IDBI Bank 3.00% to 4.80% 3.50% to 4.80%
ICICI Bank4.75% to 7.00% 5.25% to 7.00%
HDFC Bank4.50% to 7.00% 5.00% to 7.75%
Federal Bank 3.00% to 6.60% 3.50% to 7.25%
Dhanalakshmi Bank 6.50% to 7.00% 7.00% to 7.50%
DBS Bank 3.00% to 6.50% 3.00% to 7.00%
City Union Bank 5.00% to 6.25% 3.50% to 7.75%
Citibank 3.50% to 7.00% 3.50% to 7.75%
Canara Bank  2.90% to 4.00% 3.4% to 4.50%
Bank of Maharashtra2.75% to 5.75% 3.25% to 6.25%
Bank of India 4.35% to 5.75% 4.85% to 6.25%
Bank of Baroda4.65% to 5.50% 5.15% to 6.50%

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Eligibility Criteria For Recurring Deposit

The following requirements need to be met to open a recurring deposit account. 

  • An individual 
  • More than one person in joint name.
  • Minor of age 10 and above on terms defined by the bank. Accounts can also be opened in the name of minor with their father/mother, as guardians.
  • Clubs, associations, Educational Institutions, Partnerships and joint stock companies, if they are registered, and bank is pleased that the account is being used for genuine savings purpose

How To Open A Recurring Deposit?

Any post office or financial institution should be able to assist you with opening and starting an RD account. Provide as many details as you can about the terms, such as the nominee, the duration of the deposit, the total amount to be paid, the payment schedule, and so forth. Subsequently, pay the first month’s deposit in cash or by check at a bank or post office, and present further identifying documents such a PAN card and proof of address. The bank agent will finish the application process in the allotted time.

You can open an RD account both online or by visiting a bank or post office branch. To complete an online application, follow these procedures in detail:

  • Use a computer or mobile device to access your bank account.
  • Go to “Open an e-RD Account” on the home screen.
  • Provide the desired timeframe for the instalment debit, the requested instalment amount, and the bank account details. Add the applicable interest rate and the beneficiary’s statement.
  • By checking the box, you can confirm that you agree the terms and conditions after verifying the maturity date.
  • Submit your application. The email address on file will receive a receipt for the RD, and a confirmation message will be displayed.
  • The specified amount will be subtracted from the respective account. 

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Reasons To Invest in A Recurring Deposit

There are several benefits of investing in a recurring deposit that make it a popular investment tool for today’s investors.

Higher rate of interest as compared to a savings account:

The interest rates offered here are the same as those found in fixed deposits. Additionally, RD is often shown to yield a larger return than bank account savings. 

Option to invest on a monthly basis:

Regular deposits are an option for investors, in contrast to Fixed Deposits. This is the best option for people who can save a respectable sum of money on a monthly basis but do not have a significant amount of cash on hand.

Guaranteed Returns:

Recurring Deposit is considered among the safest investing choices these days. Any kind of disruption in the economy won’t have an impact on the depositor’s returns because the market is unlinked. When the RD is started, they will benefit at the rate that was agreed upon. Depositors must consider the credit ratings of institutions before making a deposit because some RDs with banks and financial institutions that are rated worse than others can be dangerous.

Reduced deposit tenure:

One has the choice to invest for a shorter period of time when they purchase an RD. Better liquidity results from this, making it the perfect option for people looking to effectively target their short-term objectives.

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FAQs on Recurring Deposit

Check out different FAQs regarding to recurring deposit here.

Q.1. Can I make monthly deposits of varying amounts into my RD account?

Ans:- No. You cannot make monthly deposits of varying amounts into a standard RD account. 

Q.2. Is it possible to cancel my recurring deposit before the end of the term?

Ans:- Yes, you can choose to cancel your Recurring Deposit before the expiry of the term. However, banks sometimes do not allow partial withdrawals.

Q.3. How the maturity amount on an RD is determined?

Ans:- Banks tend to determine the maturity amount given the depositors’ selected installment, account type, and tenure.

Q.4. What interest rate is given on RDs?

Ans:- At the moment, interest rate on recurring deposits vary from 2.50% to 8.50%.

Q.5. Can I open an RD for a minor, or as a joint account?

Ans:- Yes, it is possible open an RD account for a minor (child below 18 years) and even with another person, as a joint account.

Q.6. Can I do partial withdrawals from my RD Account?

Ans:- No, partial withdrawals are not allowed.

Q.7. Who should invest in a recurring deposit?

Ans:- An RD is predominantly suited for those who do not want to invest a lump-sum amount and want to deposit a small amount on a regular basis. Recurring deposits are perfect for people who are looking to meet their short-term goals.

Q.8. Do recurring deposits carry risk?

Ans:- No, in most cases, recurring deposits don’t carry much risk as compared to other investment options.

Q.9. What is the TDS amount for recurring deposits?

Ans:- At the moment of maturity, the interest income on RD is subject to taxation. In accordance with the current Income Tax Act, banks deduct TDS tax at source on interest generated on RD investments.

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