Recurring Deposits (RD) is one of the fine means of saving and investment options that are popular in India. This type of time deposit account offers a systematic way to save and earn interest among senior citizens, freelancers, businessmen, seasonal income generators and entrepreneurs too.
Let’s take an in-depth look at the various types of Recurring Deposits available, their benefits, interest rates, and with it more. Compare RD plans from top banks and choose the best one from different types of recurring deposits for you today.
With a higher yield, Recurring deposits take the center stage giving up to 9.10% interest rate on the lumpsum per the digital recurring deposit schemes of NBFCs.
Table of Contents:
- ⇾ Recurring Deposit (RD) Details
- ⇾ Types of Recurring Deposits Accounts Outlook
- ⇾ Regular Recurring Deposit
- ⇾ Flexi Recurring Deposit
- ⇾ Senior Citizen Recurring Deposit
- ⇾ NRE/NRI Recurring Deposit
- ⇾ Tax saving Recurring Deposit
- ⇾ Eligibility Criteria
- ⇾ Flexi Recurring Deposits Schemes
- ⇾ Benefits of Recurring Deposits
- ⇾ Frequently Asked Questions
Recurring Deposit (RD) Details
In the interest of investors, recurring deposits upon maturity, yields a good interest on the lumpsum you have deposited. You can open an account in any of the nationalised banks, NBFCs, PSUs and other financial institutions where you can earn interest over a specified tenure. It encourages disciplined saving habits and offers assured returns as a low risk investment option.
| Interest Rates Range | 4% to 7% per annum |
|---|
Note: Interest rates on RDs vary across banks and depend on factors such as the tenure of the deposit type but with senior citizens often receiving higher rates.
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Types of Recurring Deposits Accounts Outlook
The RDs in India are listed below with information on its, advantage, tenure, nature of savings and overall perspective on the type of RD.
| Type of RD | Features |
| Regular Recurring Deposit | Timely deposit with a tenure ranging from 6 months to 10 years at fixed interest rate. |
| Flexi Recurring Deposit | This is subject to variable monthly deposits, interest calculated on the total amount, flexibility in deposit amounts. |
| Senior Citizen Recurring Deposit | Higher interest rates, additional benefits like higher loan limits, special schemes for senior citizens. |
| NRE/NRI Recurring Deposit | NRE for foreign earnings, NRI for income earned in India with attractive interest rates, |
| Tax-Savings Recurring Deposit | Deposits made in a Tax Saving RD are eligible for a deduction under Section 80C of the Income Tax Act. The maximum deduction limit under this section is ₹1.5 lakh per financial year. |
Regular Recurring Deposit
The standard RD where customers deposit a fixed amount every month for a predetermined period, ranging from 6 months to 10 years. Suitable for individuals looking for a disciplined savings plan with assured returns.
Flexi Recurring Deposit
A flexible RD where depositors can vary their monthly deposit amounts, making it ideal for those with fluctuating incomes. Interest is calculated on the total amount deposited, providing more flexibility than regular RDs.
Senior Citizen Recurring Deposit
Special RDs designed for senior citizens, offering higher interest rates than regular RDs. These accounts often come with additional benefits like higher loan limits and special schemes designed for senior citizens.
NRE/NRI Recurring Deposit
These RDs are meant for Non-Resident Indians (NRIs). NRE RDs allow NRIs to deposit their foreign earnings in Indian banks, while NRI RDs facilitate managing income earned in India. Both offer attractive interest rates and the benefits of RDs.
Tax saving Recurring Deposit
A Tax Saving Recurring Deposit (RD) is a type of RD that provides tax benefits under Section 80C of the Income Tax Act, 1961. It is designed to encourage individuals to save regularly while also allowing them to reduce their taxable income by investing in a tax-saving instrument.
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Eligibility Criteria to Open a RD Account
To open a Recurring Deposit account, you must:
- Be an Indian resident or an NRI (for NRE/NRI RDs)
- Have a savings account with the bank
- Meet the minimum age requirement set by the bank (usually 18 years)
Flexi Recurring Deposits Schemes
Flexi RDs are a great choice for those who prefer low-risk investments but want more freedom in managing how much they save each month. This is helpful for freelancers and contractors with unstable incomes, as well as small business owners who may have varying cash flow.
Key Features of Flexi Recurring Deposits
- Variable Monthly Deposits:
- Depositors can choose to deposit different amounts each month. This feature is particularly beneficial for individuals with irregular income streams, such as freelancers or those in seasonal businesses.
- Interest Calculation:
- Interest is calculated based on the total amount deposited over the tenure. The interest rate may be the same as regular RDs or slightly different, depending on the bank's policy.
- Flexibility in Deposits:
- Unlike regular RDs, where missing a deposit could result in penalties, Flexi RDs usually offer more leniency. Depositors can choose to skip deposits or deposit varying amounts without incurring penalties.
- Tenure Options:
- Flexi RDs also offer a range of tenures, similar to regular RDs, typically from 6 months to 10 years. This allows depositors to align their savings plan with their financial goals.
- Loan Facility:
- Just like regular RDs, Flexi RDs often come with the option to avail loans against the deposit amount. This feature provides liquidity without the need to prematurely close the RD.
- Minimum and Maximum Limits:
- Banks may set minimum and maximum deposit limits for Flexi RDs. For instance, there might be a minimum amount that must be deposited each month and a maximum limit to ensure compliance with the scheme’s rules.
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Check out more on recurring deposits through the links provided below:
Benefits of Recurring Deposits
Recurring deposits in India offer a range of benefits with guaranteed returns, flexible tenure options, low risk, loan facility, and ease of opening make RDs a popular choice among a wide array of investors. Whether for short-term goals or long-term financial planning, RDs provide a secure and reliable way to grow savings, systematically.
Guaranteed Returns
Recurring deposits come with a fixed interest rate that is determined at the time of opening the RD account. This interest rate remains constant throughout the tenure of the deposit.
- Benefactors: Individuals looking for assured returns without the uncertainty of market fluctuations.
Flexible Tenure
RD accounts offer a range of tenures, typically from 6 months to 10 years. Depositors can choose a tenure that aligns with their financial goals and saving capabilities.
- Benefactors: Those with specific financial targets, such as saving for education, marriage, or a down payment on a house.
Low Risk
Recurring deposits are considered one of the safest investment options as they are not affected by market volatility. The principal amount and the interest earned are both secure.
- Benefactors: Risk-averse investors who prefer security over higher returns . Suitable for retirees, conservative savers, and individuals planning for future financial stability.
Loan Facility
Many banks offer loan facilities against the amount accumulated in an RD account. Typically, up to 90% of the RD amount can be availed as a loan, making it a useful feature in times of financial need.
- Benefactors: Individuals who might need quick access to funds without breaking their RD
Easy to Open
Opening an RD account involves a simple and straightforward process. Most banks allow opening RD accounts online or through their branches with minimal documentation.
- Benefactors: Suitable for all individuals, including those who may not be tech-savvy or financially knowledgeable.
Besides Types of Recurring Deposit You can also check Bank wise given below
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Frequently Asked Questions
A recurring deposit (RD) is a type of term deposit offered by banks, NBFCs, PSUs and other financial institutions that allows individuals to deposit a fixed amount of money at regular intervals (usually monthly) and earn interest on the lumpsum upon maturity.
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.
- Recurring Deposit (RD): Involves regular, small deposits over a period of time (mostly flexible deposit options with tenure of your choice). The depositor contributes a fixed amount (mostly every month) until the end of the tenure.
- Fixed Deposit (FD): Involves a one-time, lump-sum deposit that is locked in for a specific period. The entire amount is invested at once and earns interest over the tenure.
- Regular RD: The standard form of recurring deposit where fixed monthly deposits are made.
- Flexible RD: Allows variable monthly deposits within a certain range, offering more flexibility.
- Senior Citizen RD: Offers higher interest rates and additional benefits to senior citizens.
- NRI RD: Specifically for Non-Resident Indians, with different rules and benefits.
- Tax Savings RD: Helps you benefit tax payers.
The tenure for recurring deposits typically ranges from 6 months to 10 years, depending on the bank and the specific RD scheme.
Generally, the frequency of deposits in an RD is fixed on a monthly basis. However, some banks may offer flexible RD schemes where you can choose a different frequency.
- Age: Most banks require the depositor to be at least 18 years old. Minors can open an RD account with a guardian.
- KYC: Completion of Know Your Customer (KYC) norms, including proof of identity and address.
- Bank Account: Having a savings or current account with the bank offering the RD is usually required.
- Regular Savings: Encourages disciplined savings.
- Fixed Interest Rate: Interest rates are generally fixed and known at the time of opening the RD.
- Flexible Tenure: Offers flexibility in choosing the tenure.
- Secured Investment: Low-risk investment with guaranteed returns.
- Loan Facility: Some banks offer loans against the RD amount.
Interest rates on recurring deposits are typically fixed for the tenure of the deposit. The rate is determined at the time of opening the RD account and remains constant throughout the period.
If you miss a deposit, banks usually charge a penalty. The penalty amount and the impact on the interest rate vary from bank to bank. Some banks may also provide a grace period for missed deposits.
Yes, premature withdrawals from an RD account are possible but come with penalties. The interest earned may be lower, and some banks may charge a penalty fee for early withdrawal. The terms and conditions for premature withdrawal vary across banks.
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