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.
What is a Recurring Deposit?
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.
Features of Recurring Deposit
RD allows you to earn fixed interests on the amount invested at frequent intervals until the investment matures or a predetermined term ends. The total amount (i.e., the capital invested and the interest accumulated) is disbursed to the investor after the maturity period completes.
Here is a table that provides a brief overview of RD features:
| RD Features | Applicability |
| Rate of interest | Between 5% to 8% (variable from one bank to another) |
| Amount of minimum deposit | From Rs. 10 |
| Tenure of investment | Between 6 months and 10 years |
| Frequency of interest calculation | Usually every quarter |
| Mid-term or partial withdrawal | Not allowed |
| Premature account closure | Allowed with penalty |
Now, take a look at the features of RD in detail.
- 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.
Returns on RD – Interest Earned
Almost all banks in the country along with several other institutions offer Recurring Deposit investment options. The interest rates are, thus, highly competitive. Depending on the prevalent market trends at the time of account creation, the interest rates may vary anywhere between 5% and 8%. The average interest rates, however, hover around 6% to 7% for most banks.
Eligibility for a Recurring Deposit
- Anyone can do it.
- Any minor above the age of ten is entitled to open a recurring deposit account if he or she produces proof of identity.
- Any minor under the guardianship of a natural or legal guardian who is under the age of ten.
- Any corporation, firm, sole proprietorship, or commercial enterprise.
- Any government institution.
Important Factors to Check Before Applying for Recurring Deposit
- Term Period of the Recurring Deposit Account
There are mainly 3 categories into which the term periods are divided. Short-Term Tenure that lasts from 6 months to a year, Medium-term tenure that lasts from more than a year to 5 years, and Long-term tenure that lasts from more than 5 years to 10 years. You must consider checking the tenure before applying.
- Interest Rate Offered
Consider reviewing the interest rate offered before you apply for an RD account as different banks offer different interest rates depending on different term periods.
- Premature Withdraw Conditions
Usually, all banks offer the facility of opening an RD account. They also offer the choice of premature withdrawal of the same. If you decide to withdraw before maturity, the interest payable will be calculated on the basis of the tenure completed. Also, banks will charge a penalty for such withdrawal. Thus, before you invest, choose a bank that offers a high rate of interest and charges a less amount of penalty on premature withdrawal.
Types of Recurring Deposit Accounts
- Regular deposit Account
The regular RD account is intended for Indian residents who are above 18 years of age and have a fixed amount to invest. Regular Recurring Deposit allows account holders to deposit a fixed amount once a month for a fixed period to earn fixed interest on the deposited amount on maturity.
- RD account for Minors
RD Current Account is for Indian residents above 18 years of age and with a consistent amount to invest. Regular RD account allows account holders to deposit a fixed amount once a month for a fixed maturity period to earn fixed interest on the deposited amount at maturity.
- RD account for Senior Citizens
Banks offer special RD accounts for people over 60 years of age. Seniors can earn higher interest on their RD accounts than ordinary depositors according to the bank’s terms and conditions.
- NRE/NRO RD Account
Non-Resident Indians (NRIs) can open NRE i.e. Non-Resident External account and NRO i.e. Non-Resident Ordinary account. NRIs can then invest in RD using an NRE or NRO deposit account. The most significant advantage of NRIs for depositing money in an RD account is that the account does not have to pay any taxes in India.
Documents Required to Open a Recurring Deposit Account
- An application form
- Passport size photograph of the applicant
- ID and Address proof
- KYC documents
How to Open a Recurring Deposit Account Online?
- Log in to the bank’s mobile application.
- Find the option to open a RD account , for example under “investments” or “savings”.
- Enter the desired deposit amount and select the desired duration and type of RD account
- Enter the date when the monthly deposit will be made.
- Click “Continue” or “Submit” to complete the process.
- Currently, Paytm Payments Bank Limited (PPBL) does not offer the facility to open a RD account online.
How to Apply for a Recurring Deposit Account Offline?
- Go to the bank in your area.
- Speak with a bank officer, fill out the RD account Application Form, and include information about the type of Recurring Deposit Account you want to start, its duration, and the RD maximum amount you want to deposit each month, and any nominations.
- Forward the application together with the deposit payment.
- You can request a recurring deposit account from a bank clerk.
- It is not currently possible to open a recurring deposit account in person at a bank branch with Paytm Payments Bank Limited (PPBL).
FAQs
Can I cancel my recurring deposit before the end of the term?
Yes, you can cancel your Recurring Deposit before the term expires. Banks, on the other hand, often do not allow partial withdrawals.
Is it possible to add nominees to my Recurring Deposit account?
Yes, nominees can be added to your Recurring Deposit account.