Recurring Deposit
A Recurring Deposit, commonly known as RD, is a unique term-deposit. It is an investment tool which allows people to make regular deposits and earn decent returns on the investment. Due to the regular deposit factor and an interest component, it often provides flexibility and ease of investments to users/individuals.
However, it is essential to know that RDs are different from Fixed Deposits/FDs . RDs are flexible in most aspects. An RD account holder can choose to invest a fixed amount each month while earning decent interest on the amount. RDs are an ideal saving-cum-investment instrument.
Most major banks in India offer Recurring Deposit Accounts, with a term that often ranges between 6 months to 10 years, also providing individuals with the opportunity to choose a term according to their needs. However, the interest rate, once determined, does not change during the tenure; and on maturity, the individual will be paid a lumpsum amount which includes the regular investments as well as the interest earned.
Features of Recurring Deposit
- Recurring Deposit schemes aim at inculcating a regular habit of saving in people
- The minimum amount for deposits often varies from one bank to another. You could invest with an amount as small as Rs. 100.
- The minimum period of deposit is six months, while the maximum period of a deposit is 5 years
- The rate of interest is equivalent to that offered for a Fixed Deposit. Therefore, the interest rates are higher than Savings Account.
- Premature withdrawals are However, depending on the bank, they may allow you to close your account before the maturity period on certain conditions.
A Recurring Deposit can be funded periodically through Standing Instructions that are usually instructions given by the customer to the bank, to credit the RD account every month from his/her Savings or Current Account