Recurring Deposit (RD) – Types, Features, Returns & Benefits

Among the low-risk investment tools with moderate and assured returns, Recurring Deposit (RD) is a popular investment option in India. It comes with an option of flexibility for customers in the choice of investment amount and tenure accompanied by multiple other benefits.

Available in flexible tenure options ranging from 6 months to 10 years, this investment tool offered by multiple banks and NBFCs helps channelize monthly savings for long or short-term corpus creation.

Investors can thus choose a minimum amount to be invested every month over the term for assured wealth generation.

If you do not have a lump sum  amount to meet short-term goals, depositing a small share of your income to the RD account every month serves the purpose well.

A brief overview of Recurring Deposits

You can opt to open your Recurring Deposit account with multiple financial institutions like banks, NBFCs or even post office. While the minimum amount of investment may vary from one institution to another, you can usually start with a considerably small amount, say Rs. 500 every month, as per your budget.

However, the right RD would be the one that allows for a suitable investment amount given your capacity and provides a maturity option that rightly fits your short or long-term funding plans.

You must, therefore, make sure to consider the available flexibility when choosing the financial institution to invest with.

Features of Recurring Deposit

RD allows you to earn fixed interests on the amount invested at frequent intervals until the investment matures or a pre-determined term ends.

The total amount (i.e., the capital invested and the interest accumulated) is disbursed to the investor after the maturity period completes.

 

Now, take a look at the features of RD in details.

• Minimum investment

The minimum investment amount varies from one bank to another. You can open this account with an amount as small as Rs. 10.

• Deposit term

The minimum deposit tenure starts from 6 months. You can choose a suitable period of deposit with a maximum tenure stretching up to 10 years.

• Interest rate

The interest rate offered on RDs is always higher than the interest earned through a savings account. The interest rates offered on RDs are also similar to what you can earn through FDs.

However, the periodic investment instead of a lump sum amount makes it suitable for individuals who aim to create a corpus through their monthly savings.

• Withdrawal on maturity

Withdrawal from this account is allowed only after it attains maturity. However, if you choose to withdraw the amount before the maturity period ends, it attracts a premature penalty.

• Loan against deposit

You also have an option to avail a loan against the RD. Banks may allow up to 95% of the deposit amount as a loan against deposit used as collateral.

• Standing instructions for monthly deposits

If you find it inconvenient to deposit the amount periodically, banks also facilitate such payments as deductions from a linked account (savings or current) upon standing instructions.

Types of Recurring Deposits

RD for senior citizens

RD for NRI/NRE