A Recurring Deposit (RD) is a savings instrument offered by banks and post offices in India. It promotes regular saving habits by allowing deposits of a fixed amount at predetermined intervals, typically monthly. RDs are ideal for individuals seeking to build a corpus over a fixed period through disciplined saving.
Interest rates offered on RDs generally range from 5% to 8%, depending on the bank, chosen tenure, and prevailing market conditions. The minimum tenure for an RD is typically six months, and it can extend up to ten years. If you're looking for a safe and secure way to save money regularly and grow your corpus over time, a Recurring Deposit might be a suitable option for you.
Table of Contents:
- ⇾ Recurring Deposit Interest Rates
- ⇾ RD Interest Rates for Regular Citizens
- ⇾ RD Interest Rates for Senior Citizens
- ⇾ Eligibility Criteria for Opening an RD
- ⇾ Documents Required to Open an RD
- ⇾ Features of Recurring Deposits
- ⇾ Types of Recurring Deposit Schemes
- ⇾ Renewals & Withdrawals of RD
- ⇾ Premature Withdrawal Rules for RD
- ⇾ Tax Saving RD Schemes
- ⇾ Steps to Open an RD Account Online
- ⇾ Steps to Open an RD Account Offline
- ⇾ Frequently Asked Questions
Recurring Deposit Interest Rates
The interest rates for RDs play a major role in determining the returns you might earn on your investments. However, the interest rates are subject to change and may differ for regular citizens and senior citizens.
RD Interest Rates for Regular Citizens
The RD interest rates for regular citizens are typically standard and may vary based on the deposit amount and tenure. The table below presents the RD interest rates for regular citizens.
| Top Banks | RD Interest Rates for Regular Citizens |
|---|---|
| SBI Bank | 6.50% to 7.00% |
| IDBI Bank | 6.25% to 7.00% |
| ICICI Bank | 4.75% to 7.20% |
| HDFC Bank | 4.50% to 7.25% |
| Axis Bank | 5.75% to 7.20% |
| Canara Bank | 6.15% to 7.25% |
| Indian Bank | 4.50% to 7.25% |
| Indian Overseas Bank | 5.75% to 7.30% |
| Yes Bank | 6.10% to 7.75% |
| Bandhan Bank | 4.50% to 7.85% |
| Bank of India | 4.50% to 6.00% |
| City Union Bank | 6.25% to 7.00% |
| Federal Bank | 5.75% to 7.50% |
| IndusInd Bank | 7.00% to 7.75% |
| Punjab National Bank | 6.00% to 7.25% |
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Note: The above-mentioned interest rates are subject to change. Please visit the official website for updated rates.RD Interest Rates for Senior Citizens
Interest rates of senior citizens are usually higher to help older individuals earn more on their regular deposits. The table below shows the current RD interest rates specifically for senior citizens.
| Top Banks | RD Interest Rates for Senior Citizens |
|---|---|
| SBI Bank | 7.25% to 7.50% |
| IDBI Bank | 6.75% to 7.50% |
| ICICI Bank | 5.25% to 7.75% |
| HDFC Bank | 5.00% to 7.75% |
| Axis Bank | 6.25% to 7.85% |
| Canara Bank | 6.65% to 7.75% |
| Indian Bank | 5.00% to 7.75% |
| Indian Overseas Bank | 6.25% to 7.80% |
| Yes Bank | 6.60% to 8.25% |
| Bandhan Bank | 5.25% to 8.35% |
| Bank of India | 5.00% to 6.50% |
| City Union Bank | 6.50% to 7.50% |
| Federal Bank | 6.25% to 8.00% |
| IndusInd Bank | 7.50% to 8.25% |
| Punjab National Bank | 6.50% to 7.75% |
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Note: The above-mentioned interest rates are subject to change. Please visit the official website for updated rates.Are you looking for a personal loan?
Eligibility Criteria for Recurring Deposits
An RD account is a great way to save money regularly and earn interest on your deposits. The eligibility criteria for opening a Recurring Deposit (RD) includes:
- Age: Most banks allow individuals above 18 years to open an RD account. Some banks may also offer RD accounts to minors with the help of a guardian or parent.
- Income: There is no minimum income requirement to open an RD account. However, banks will have a minimum deposit amount you need to start the RD. This can vary from ₹100 for some public sector banks to ₹1000 or more for private sector banks.
- Account Type: In most cases, you will need a savings account with the same bank to be eligible for an RD.
- RD accounts can be opened by individuals, Hindu Undivided Families (HUFs), companies (private and public limited), trusts, and societies.
- Tax implications: Interest earned on RDs exceeding ₹10,000 in a financial year will have TDS deducted if your income tax bracket applies.
Documents Required to Open an RD
To open a Recurring Deposit (RD) account in India, you'll typically need to provide some basic documents for Know Your Customer (KYC) purposes.
- Identity Proof: Passport, PAN Card, Voter ID Card, Driving Licence issued by the Regional Transport Authority, Aadhaar Card. (Any one of these documents can work.)
- Address Proof: One of the following documents can serve as your address proof. (Passport (if it has your current address), Voter ID Card, Driving Licence, Bank Statement (issued in the last 3 months), Utility Bill showing your current address)
- PAN Card: Most banks recommend having a PAN card to avoid Tax Deducted at Source (TDS) on the interest earned if it exceeds ₹10,000 per year (Optional).
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Features of Recurring Deposits
Recurring Deposits (RDs) offer a structured approach to saving money. This savings option is designed for individuals who want to set aside a fixed amount regularly. RDs come with several features and benefits for your financial goals and preferences.
The table below presents the list of primary features of Recurring Deposits.
| Features | Description |
|---|---|
| Minimum Investment | Typically low, some banks allow deposits as low as Rs. 100 |
| Flexible Tenure | Minimum of 6 months to 10 years (depending on the bank) |
| Fixed Deposits | Deposits are made in a fixed amount at regular intervals (usually monthly) |
| Interest Rate | Typically higher than regular savings accounts, interest is compounded (often quarterly) |
| Lock-in Period | A short period (30 days to 3 months) where early withdrawal incurs a penalty |
| Premature Closure | Allowed with a penalty on interest earned |
| Limited Liquidity | Funds are not readily accessible during the tenure |
| Overdraft Facility | Some banks offer an overdraft facility against the RD account |
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Types of Recurring Deposit Schemes
Banks have various types of RD accounts for diverse customer requirements. These different schemes may vary in terms of tenure, deposit amounts, interest rates, and special features.
Here are the common types of Recurring Deposit:
- Regular Recurring Deposit (RD): It allows you to deposit a fixed amount of money at regular intervals (usually monthly) for a chosen tenure. The interest rate is fixed for the entire tenure and interest is compounded periodically (usually quarterly).
- Senior Citizen's RD Account: This RD scheme is designed specifically for senior citizens. It typically offers higher interest rates than regular RD accounts. Some banks may also offer additional benefits like exemption from penalty on premature closure or free accidental death insurance.
- RDs for Minors: Minors can open RD accounts with the help of a guardian. This can be a good way to introduce saving habits in children from a young age.
- Tax Saving RD (Linked to Tax Saving Fixed Deposit (TD): This type of RD is linked to a tax saving fixed deposit (FD). The deposits made towards the RD are invested in the tax-saving FD at the end of the tenure. This allows you to claim tax deductions under Section 80C of the Income Tax Act. However, the interest rate on tax-saving RDs is usually lower than regular RDs.
- NRE/NRI Recurring Deposit Account: Non-resident Indians (NRIs) can open RD accounts with NRE (Non-Resident External) or NRO (Non-Resident Ordinary) accounts. NRE RD accounts offer tax-free interest income, while NRO RD accounts are taxable.
Renewals & Withdrawals of an RD
When your RD matures, you have options to either renew it or withdraw your funds. Renewals allow you to continue growing your savings, while withdrawals give you access to your money and earned interest.
Here is the primary information regarding renewals and withdrawals of Recurring Deposits.
Renewal of Recurring Deposit
- Automatic Renewal (Auto-renewal): Many banks offer an auto-renewal facility for RDs. If you choose this option, the bank will automatically renew the deposit for a similar tenure (the one you originally chose) at the prevailing interest rate on the maturity date. Prevailing interest rates may be different from the rate you earned during the initial tenure.
- Manual Renewal: You can also choose to renew your RD manually at the branch or online banking portal. This allows you to choose a new tenure and potentially negotiate a better interest rate (depending on bank policies).
Withdrawal of Recurring Deposit
- Maturity Withdrawal: On the maturity date, you can withdraw the entire amount (principal + accumulated interest) from your RD account.
- Premature Withdrawal: Withdrawing your RD before maturity typically incurs a penalty on the interest earned. The penalty amount varies depending on the bank and the remaining period of the RD tenure. The penalty is a reduction in the interest rate for the entire tenure or a specific period.
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Premature Withdrawal Rules for RD
Here are the primary rules and considerations for premature withdrawals from Recurring Deposit accounts.
- Generally Allowed: Most banks allow at least one premature withdrawal before maturity.
- Minimum Tenure Requirement: You typically need to complete at least a year of deposits (12 monthly installments) to be eligible for withdrawal.
- Partial Withdrawal Limitation: Some banks may not allow partial withdrawals, requiring you to take out the entire deposit.
- Penalty on Interest: Withdrawing early comes with a penalty. This reduces the interest earned on your deposit, often calculated as a lower interest rate applied for the entire tenure or a specific period.
- Penalty Varies: The penalty amount depends on the bank and the remaining period in your RD tenure. The closer you are to maturity, the lower the penalty.
Tax Saving RD Schemes
Recurring Deposits (RDs) themselves are not tax-saving schemes under section 80C of the Income Tax Act. The interest earned on them is taxable. However, there are some tax-saving schemes offered by banks and post offices that function similarly to RDs and do offer tax benefits.
Here are some tax-saving investment options that function like RDs:
- Public Provident Fund (PPF): PPF is a government-backed savings scheme that offers interest rates comparable to RDs. It has a lock-in period of 15 years, but you can make partial withdrawals after the 7th year. The interest earned and the maturity amount on PPF are completely tax-free.
- Employee Provident Fund (EPF): EPF is a retirement savings scheme offered by employers. A part of your salary and your employer's contribution goes into your EPF account. The interest earned on EPF is tax-free up to a certain limit.
- National Savings Certificate (NSC): NSC is a fixed-income investment scheme offered by the government. It has a lock-in period of 5 years and offers tax benefits on the interest earned and the maturity amount.
- Sukanya Samriddhi Account: This is a government savings scheme specifically for girl children. It offers a high interest rate and tax benefits on the interest earned and the maturity amount.
Steps to Open an RD Account Online
- Step 1: Visit your bank's website and log in to your internet banking portal using your credentials.
- Step 2: Look for a section dedicated to "Deposits," "Recurring Deposits," or similar terms.
- Step 3: Select the option to open a new recurring deposit account.
- Step 4: Specify your preferred deposit amount, tenure (duration), and nomination details (who receives the money if you die).
- Step 5: Choose the savings account from which the bank will deduct your monthly RD installments.
- Step 6: Carefully review the interest rate, terms & conditions, and total maturity amount. Submit the application online.
Steps to Open an RD Account Offline
- Step 1: Visit your bank branch where you already have a savings account. Complete some additional Know Your Customer (KYC) verification steps.
- Step 2: Choose an RD scheme that suits your saving goals (interest rate, period, amount).
- Step 3: The bank will provide you with an RD application form. Fill out the form completely and accurately, including name, deposit details, and nominee.
- Step 4: Submit the completed form with ID, address proof, and initial deposit (cash/cheque).
- Step 5: The bank representative will process your application and verify your documents. You will receive an account statement or confirmation slip with details of your RD account.
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Frequently Asked Questions
A recurring deposit lets you invest a fixed amount regularly, like monthly, for a chosen period. You earn interest on the total amount, making it a good way to grow your savings gradually.
Recurring Deposits (RDs) are a safe and steady way to save. They offer guaranteed returns with interest rates higher than regular savings accounts, and you can build savings discipline by setting up fixed monthly deposits.
In most cases, anyone above 18 with a valid ID and address proof can open an RD account. Some banks allow minors with a guardian's supervision.
The minimum tenure for an RD is typically 6 months and the maximum can go up to 10 years, depending on the bank's offerings.
The minimum deposit for a short-term RD typically ranges from ₹500 to ₹1,000 per month, depending on the bank's requirements.
The interest rate for a Recurring Deposit (RD) varies depending on the bank and the chosen scheme but typically ranges from 2.50% to 8.50% per annum. Senior citizens can often enjoy higher rates, up to 9.25%.
Withdrawing money early from an RD account is possible, but generally not recommended. You'll likely incur a penalty and lose out on the higher interest rate.
Missing an RD installment may lead to penalty fees and disrupt your interest accumulation, reducing your overall return. For consecutive misses, your bank might even close the account.
Yes, the interest earned on RD is taxable in India. There is a tax deducted at source (TDS) of 10% on the interest amount exceeding Rs. 10,000 in a year.
Yes, you can open multiple RD accounts. There is no limit on the number of accounts you can have, allowing you to set up deposits with different terms or at different banks for the best rates.
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