RECURRING DEPOSIT (RD) www.websoftex.com
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WHATY IS RECURRING DEPOSIT • Recurring Deposit is a savings option that helps you plan for your future needs. • People with regular income can make a financial provision for the future by investing a small amount of their income regularly in a recurring deposit (RD) for a pre-determined period and earn interest on those investments, as high as fixed deposits.
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WHATY IS RECURRING DEPOSIT • When your deposit finally matures, the lump sum including the principal and accumulated interest is paid back to you. • More importantly, the interest on RD remains same throughout the term once you have invested, unlike many other investment products which are subject to periodic change. • No matter what the interest rate being offered, you can easily estimate your potential earnings by using a Recurring Deposit Calculator. Page 3
HOW DOES IT WORKS • According to loan comparison website, Deal4loans, you can start an RD with a minimum amount of R10, but it can vary from bank to bank. • The tenure ranges from three months to 10 years. • Some banks have a lock-in period of 1-3 months. • The money you invest in an RD, earns interest, and it gets compounded. Page 4
HOW DOES IT WORKS • Data from Deals4loans shows that as of June, interest rates on RDs were in the range of 79.10% per annum, depending on bank and tenor chosen. • Senior citizens get an additional 15-25 basis points as interest. • In a regular RD, in case of delayed instalments, a penalty is charged as a flat fee or a percentage of the amount. Page 5
FEATURES OF RD Recurring Deposit schemes are effective inculcating a regular habit of money saving.
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The minimum amount that can be deposited in RD accounts may start from an amount as small as Rs.10. The minimum amount defers from bank to bank. The minimum period of deposit starts from 6 months and may extend to the maximum period of 10 years in most RD Accounts. Page 6
FEATURES OF RD • RD interest rates are equal to that offered on a Fixed Deposit, which is generally higher than any other Savings scheme offered by banks. • Using a recurring deposit calculator you can figure out how much you will get back at the end of the RD Tenure.
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FEATURES OF RD • RD accounts do not allow premature ormid -term withdrawals. • However, the bank may allow closing the account before the maturity period with a penalty for premature withdrawal. • RD offers an additional benefit of using the deposit as collateral to take a loan against the deposit. • RD can be funded periodically directly from your Savings or Current account through standing instructions given to the bank by you. Page 8
FEATURES OF RD
• Almost all Indian banks allow resident Indians, HUF (Hindu Undivided Families) as well as NRIs (Non- Resident Indians)to put an account under their respective recurring deposit schemes. • Some banks even offer RD scheme for children of course with guardians to supervise their finances. Page 9
ELIGIBILITY TO RD •
No matter which bank or company you invest with or the rate you receive on the RD, the recurring deposit calculations are carried out using the same formula or by simply using a recurring deposit calculator. •
Duration of Recurring Deposit
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Customers can open a Recurring Deposit account with a bank, where the compounding of interest will be done on quarterly basis.
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The deposit term starts with a minimum period of 6 months, and after that they can choose to increase the tenure in multiples of 3 months up to a maximum period of 10 years. Page 10
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