Why is Recurring Deposit is the safest investment tool?
Everyone will be searching for how to save money in this
period where creating an emergency fund is necessary and achieving finical
freedom. In this article, we will explain various topics mention below-
What is
Recurring Deposit and how it can be benefited?
How to
achieve your various goals with protecting your capital?
Recurring Deposit (RD) is an investment term of deposit
offered by various banks to make regular deposits offer a fixed term. It
provides an opportunity to save money by investing regular monthly deposit over
a period of time. The interest rates are usually starting from 5.00% - 8.00%
The main advantage of RD is that it is a Risk-free
investment as the returns are fixed and you will be receiving the applicable
amount at the time of maturity. RD offers greater flexibility than FD (FixedDeposit) as there are various payment options available. The recurring deposit
helps when there is no lump sum amount to invest. The process of investing in
RD is very simple and easy to use.
Various Features of a RD account
·
Minimum Investment- The minimum amount starts
from Rs 1000, Varies from bank to bank and the maximum amount is no limit for
some banks.
·
Deposit term-. RD ranges from a minimum tenure
of 6 months to 10 years according to needs. The interest rates are fixed once
the RD is decided on the basis of tenure and maturity.
·
Interest rate - The interest rates are changing
according to market conditions which will vary between 5% to 7 % as it depends
on repo rates from RBI. The interest rates are high for medium terms whereas
for the long term the rates will below.
·
Maturity amount-
·
Loan against deposit- Up to 90 % of the deposited
amount, loans, and OD can be taken according to banks.
·
Flexi RD Account - Some Banks also provide Flexi
RD Account in which there is a flexibility of amount deposit as per his/her
convenience with various conditions applied.
Various use of RD
·
Short term goals like a vacation, Gifts and many
more
·
Marriages Expenses
·
Higher Education.
· It
helps to create a regular habit of saving money.
It is similar to SIP (systematic Investment Plan) in which
every month a fixed amount of money is transferred to RD account for a fixed
period of time and fixed interest rate. Rd is useful when you do not have lump sum
amount to invest for your needs because investing step by step is easy for
everyone. It is used to meet short term and long-term goals easily as the
returns are fixed. It also helps to create funds for an emergency.
For senior citizens of age 60 years and above there will be 0.25% to 0.75% interest rate extra provided. Minors can open an RD account easily under parents’ guardianship. The nomination facility is also available.
Various terms in RD account
·
Short term tenure – 6 months to 1 year
·
Medium-term tenure – 1 year to 5 year
·
Long term tenure- 5 years to 10 years.
RD Interest Rates
|
Name of the Bank |
Regular RD Interest Rates (p.a) |
|
HDFC Bank RD |
6.25%-7.25% |
|
SBI RD |
6.70% -6.85% |
|
ICICI Bank RD |
6.00%-7.25% |
|
Bandhan Bank RD |
6.40%-7.10% |
|
Canara Bank RD |
6.35%-7.00% |
Disadvantages of RD
There is a penalty charge for not depositing monthly installments.
If in case more than 6 consecutive installments are not paid the account shall
be closed and the remaining balance is paid to the account holder.
TDS (Tax Deduction at source) is applicable to interest paid
on recurring deposit account. IF the income is above Rs 10000 there is 10% TDS
is deducted by the bank.
Premature withdraw of RD - There is a 1% penalty levied by
the bank in case of premature withdraw of the amount before the term ends.
Banks do not allow partial withdraw in the RD account. Also, the incentives
provide are not provide in terms of premature withdrawal
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