Recurring Deposits






What is a Recurring Deposit?

A Recurring Deposit or RD is an investment tool. People who can make regular deposits can choose to invest in this tool to earn decent returns on their investment. Both banks and post offices offer recurring deposits.

Eligibility

  • To invest in RD, the applicant must be a citizen of India.
  • Hindu United Families or HUFs can also invest in this scheme.
  • RD accounts can be opened by individuals, two adults jointly, and also a guardian on behalf of a minor.
  • A minor who has attained the age of at least 10 years can also open an account in his or her own name.

How it Works

  • The minimum amount to be deposited in a Postal RD is Rs 10. There is no maximum limit. Money can be deposited in multiples of Rs. 5.
  • The minimum amount for RDs in bank varies from bank to bank.
  • The current interest rate for Postal RD is 7.2%.
  • The interest rates for RD accounts vary from bank to bank and on the basis of tenure and amount of deposit.
  • For RD accounts in banks, the amount to be deposited every month is fixed.
  • The interest is compounded quarterly.

Maturity and Withdrawal

  • Postal 
  • The maturity period of a postal RD is 5 years.
  • One can withdraw half the balance during premature closure after a year.
  • The interest is later payable at the rate for Post Office Savings Account.

  • Bank
  • The maturity period is flexible. The minimum tenure is six months. In multiples of 3 months, the RD account can be extended for a maximum period of 10 years.
  • In case of premature withdrawal, the interest rate will be decreased by 1%.
  • Partial withdrawal is not allowed in most banks.

Advantages

  • Postal 
  • During the entire duration of deposit, there is fixed rate of return.
  • Nomination facility is available.
  • The facility of transferring the account is available.
  • There is no upper limit on investment.
  • A rebate is offered to customers who make advanced deposits of at least 6 months.
  • Any number of accounts can be opened.

  • Bank
  • The amount to be deposited in the RD account gets automatically debited from one’s account.
  • One can avail loans by using deposits in RD as collateral.
  • Nomination facility is available.
  • One can opt for flexible RD where the investor can deposit money according to his convenience.

Limitations

  • Postal
  • One has to visit the post office every month for depositing in the RD account.

  • Bank
  • It is not possible to alter the deposit amount in case of a RD.
  • The recurring deposit rates are changed every now and then.

Recurring deposit is one of the most attractive investments options in India. One can choose to opt for a Postal RD or an RD offered by the nationalized banks after considering the various features. RDs are easy to operate and lets one save money in a disciplined manner.

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