Recurring Deposit: Features, Benefits, Eligibility & Interest Rates

Confused about what to do with those savings you saved from your blood-sweat earnings? Don’t worry there are many ways to deal with it but do you know the best way? It’s investing your money in a recurring deposit. Now you must be thinking about what a recurring deposit is and how it works. Well, all you have to do is read the following article to know all your answers.

What is recurring deposit?

A recurring deposit is one that is made on a regular basis. Many banks offer this service, which allows people to make gets additional and earn good returns for investors.

A recurring deposit account is a postal service account or a kind of financial service into which a depositor regularly deposits a decent amount of money each month for a certain period of time.

The concept of producing small monthly savings through the recurring deposit Plan allows the user to accumulate an appealing sum at maturity. The interest rates on recurring deposits are determined by calculating on an annual financial compounded basis.

A regular fixed deposit entails putting money aside that can be withdrawn after a certain period of time. In the meantime, you are unable to change or supplement the amount of money.

The recurring deposit procedure is similar, with one major difference. Rather than making an investment in a lump sum, you should deposit a set amount into your RD in bank account each month, as determined when you opened your account. This may be a small sum that will not deplete your savings account. And when the money matures, you’ll have a large sum that is greater than your principal plus interest.

Features And Benefits of Recurring Deposit Account

The following are the primary features and benefits of a Recurring Deposit account:

• Mostly all banks in India offer a Recurring Deposit scheme with terms ranging from 6 months to 10 years, giving customers the flexibility to choose what works best for them.

• Interest rates differ from one bank to the next and are also affected by the term of the loan.

• RD provides you with a fixed interest rate on your invested amount at a set frequency until the term ends or you reach maturity. At the end of the term, you will be paid the amount upon maturity (which is your invested capital) plus any residual or managed to accumulate interest.

• The goal of recurring deposit schemes is to instill in the public a regular saving habit.

• The minimum deposit amount tends to vary from bank to bank. It could be little for instance Rs.10.

• Recurring deposits assist the average person in developing the habit of saving on a regular basis.

• Once determined, the interest rate will apply for the duration of the loan. Once the RD in a bank account is opened, the interest rate will not change.

• Recurring Deposit allows you to borrow against your savings. Most banks lend up to 80 percent to 90 percent of the account holder’s savings.

• Most banks now offer the option of automatically deducting the RD amount from the savings account. This feature of a recurring deposit account will benefit the individual by preventing missed payments.

Types of Recurring Deposit Accounts

There are many recurring deposit types you should know for better understanding. 

• Regular RD accounts:  Regular recurring deposit accounts can be opened by Indian residents over the age of 18. Account holders deposit a set amount into the account once a month for a set period of time, earning a set interest rate. Interest will be determined by calculating using compound or concise methods depending on the account’s tenure.

• Minors are handled by RD: Individuals under the age of 18 may open accounts in their names, but only with the permission of their parents or guardians. A fixed monthly installment in the series and tenure will be determined when the account is opened. Returns may be comparable or slightly higher when compared to regular RD in bank accounts.

• Senior citizens’ RD accounts: Banks offer senior citizens, those over the age of 60, a committed RD account. Senior citizens may be more interested in RD than regular clients. This interest is aggravated on a quarterly basis.
• Accounts for NRE/NRO RDs: Non-Resident Indians (NRIs) can open RD account balances for External (NRE) or Normal (NRO) purposes. NRIs can earn a good rate of interest and save on income managed to earn both within and without India by opening such accounts.

How to open a recurring deposit? 

When you open a recurring deposit account, you must decide on the RD tenure, installment amount, nomination information, and maturity amount. After filling out the necessary information, return the form to the bank with a cheque for the installment amount.

If you are a bank customer, you must enter your bank account information as well as other information such as maturity guidelines and nomination details. If you are opening a recurring deposit account in a bank where you do not already have an account, you need to provide your Documentation along with the account section and other information.

Following that, you must either give your bank standing instructions for a regular intervals installment debit to your RD account or individually deposit money into your RD account on a regular basis for each installment.

If your annual income is less than the minimal level taxable amount but your annual interest exceeds Rs. 40,000 or Rs. 50,000 for senior citizens, you must file Form 15G/15H to be exempt from TDS on your interest. After that, once the RD has been analyzed and decided to open, your bank will issue an RD certificate with all pertinent information.

Recurring Deposit Account Documentation

The following documents are required to open a recurring deposit account:

1. Application form: 

This varies depending on whether you open the money deposited account with a bank or a post office (PO).

2. Photograph: 

Two passport-sized photographs of the person seeking the Recurring Deposit Account.

3. Identity Proof: 

This can include your passport, driver’s license, state or national government service identification card, PAN card, or Aadhar card.

4. Address Proof: 

This can be your passport, driver’s license, Aadhaar card, water bill, phone bill, or perhaps even your electricity bill.

5. KYC documents: 

To authenticate the individual’s “Know Your Customer” information in order to enter the Recurring Deposit account.

Wrapping Up!

Recurring Deposit, or RD, is a great investment alternative provided by banks, and post offices in India that enables you to save a small amount on a regular basis rather than in one lump sum. It is used to accumulate savings both shorter and longer term. So what are you waiting for? Save your money with recurring deposits now!

FAQs

1. How much money can I deposit into a recurring deposit account?

The minimum amount you can deposit into a recurring deposit account varies from bank to bank, but is typically around Rs. 500. There is no maximum limit on the amount you can deposit, though most banks will capped the interest earned on very large deposits.

2. What are the benefits of a recurring deposit account?

A recurring deposit account can provide you with a higher interest rate than a regular savings account, and you will have the flexibility to withdraw your money at any time without penalty. This type of account can also help you save for specific goals, such as a down payment on a home or a child’s education.

3. How do I open a recurring deposit account?

You can open a recurring deposit account at most banks and financial institutions. The minimum amount required to open an account may vary, so be sure to check with your chosen institution. Once you have opened an account, you will need to make regular deposits into it in order to keep it active. The amount you deposit and the frequency of your deposits will be determined when you open the account.