A Recurring Deposit or RD as it is commonly called is a unique term deposit offered by banks. It is an investment tool which permits those with an ability to make regular deposits earn decent returns on their investment. Basically consisting of regular deposits and an interest component, a Recurring Deposits provides flexibility and ease of use to individuals. Account holders can choose to invest a particular amount each month, ensuring that they have sufficient income for an emergency, with the RD earning decent interest on the amount. Given the fact that FDs are rigid and are not ideal for short terms, a Recurring Deposit is an ideal investment cum savings option.
Almost all major banks in India offer a Recurring Deposit Account, with the term typically ranging between 6 months and 10 years, providing individuals an opportunity to choose a term as per their needs. Competition among banks to attract new customers has ensured that interest rates are competitive, helping an investor earn a good amount on maturity. The interest rate, once determined, does not change during the tenure, with the Reserve Bank of India ensuring that strict guidelines are followed. On maturity, the individual will be paid a lumpsum amount which includes the regular, periodic investments and the interest earned on them.
A number of banks in India offer customers the facility to open a recurring deposit account.
The RD Interest Rates for regular citizens for the top banks are as follows:
|Name of the Bank||Tenure||Regular RD Interest Rates (p.a)|
|HDFC Bank||6 months to 10 years||6.25%-7.00%|
|SBI||1 year to 10 years||6.65% -7.75%|
|ICICI Bank||6 months to 10 years||6.00%-7.00%|
|Bandhan Bank||6 months to 10 years||6.80%-7.10%|
|Canara Bank||6 months to 10 years||6.35%-7.00%|
The RD Interest Rates for senior citizens for top banks are:
|Name of the Bank||Tenure||Senior Citizen RD Interest Rates (p.a)|
|HDFC Bank||6 months to 10 years||6.75%-7.50%|
|SBI||1 year to 10 years||7.15% -8.25%|
|ICICI Bank||6 months to 10 years||6.50%-7.50%|
|Bandhan Bank||6 months to 10 years||7.30%-7.60%|
|Canara Bank||6 months to 10 years||6.85%-7.50%|
*The above interest rates are for investments less than Rs.1 crore
RD offers you a fixed interest on the invested amount at a specific frequency till the pre-determined term or up on maturity. At the end of the term, the amount upon maturity(which is your invested capital) along with remaining or accumulated interest is paid.
The main features of Recurring Deposit account are as follows:
Recurring Deposit schemes aim to inculcate a regular habit of saving among the public.
Minimum amount that can be deposited varies from bank to bank. It can be an amount as small as Rs.10.
The minimum period of deposit starts at six months and the maximum period of deposit is ten years.
The rate of interest is equal to that offered for a Fixed Deposit and is hence higher than any other Savings scheme.
Premature and mid term withdrawals are not allowed. However, the bank may allow to close the account before the maturity period, sometimes with a penalty for premature withdrawal.
Recurring deposit is an investment product that is made available by banks. The principal amount invested earns interest at regular intervals and the lump sum is handed over to the depositor at the time of maturity. Although recurring deposit is a safe investment option and the return on investment is mostly guaranteed, there are some factors any person should consider before investing money in a recurring deposit account.
A method of earning on the capital invested in a recurring deposit account is to invest in the term period that provides a high rate of interest with the term period being as short as possible.
The formula to calculate the interest that can be availed by the depositor at the end of the maturity period for a recurring deposit account is as follows:
‘I’ is the interest rate that is to be calculated via the formula.
‘n’ is the number of months.
‘r’ is the rate of interest per annum.
‘P’ is the principal amount.
The formula to calculate the maturity amount is
M = P(n)+I
M is the maturity amount received by the depositor from the recurring deposit account at the end of the maturity period.
P(n) is the principal amount deposited.
I is the interest received by the depositor on the recurring deposit account.
During premature closure of a Recurring Deposit for reinvestment in a term deposit, interest will be paid to the account holder without reducing interest rate by 1% as penalty. This happens only if the deposit after reinvestment, remains with the bank for a period longer than the remaining period of the original deposit. However, if the account holder withdraws the deposited amount before its maturity, the rate of interest that he/she will receive shall be the one applicable to the period for which the deposit has remained with the bank, with a one per cent penalty for premature withdrawal. If after reinvestment the deposit is withdrawn before the maturity period, the penalty of one per cent will be levied from the date of original contract up to the date of premature withdrawal after reinvestment. If the premature withdrawal is made after the due date of maturity of the deposit, then the penalty is levied from the date of reinvestment to the date of premature withdrawal after reinvestment. Terms and conditions about renewal and withdrawal of Recurring Deposits vary from bank to bank.
The interest earned by the depositor on a recurring deposit account is taxable. The amount of Tax Deductible at Source (TDS) is dependent on the income per annum of the depositor. The three different income slabs and the applicable TDS on it are:
Read on to know more about Income Tax on RD Rates
A recurring deposit calculator takes the following parameters into account before calculating the maturity amount that will be collected by the depositor at the end of the term period.
Investing money in a recurring deposit account is a shrewd investment as the principal amount invested is almost guaranteed to give a return. The rate of return offered on it is also attractive. All this makes the recurring deposit a smart investment option.
Some of the other benefits of investing money in a recurring deposit account are:
One of the best investment options for NRIs/NREs is a recurring deposit account. Huge savings can be made using small monthly investments. NRIs can either invest in either NRO or NRE Recurring Deposit accounts.
Read on to find more about NRI/NRE Recurring Deposit
A recurring deposit account enables an individual to deposit fixed amount every month for a pre-defined period which earns interest similar to Fixed Deposits (FD). RDs can be availed by senior citizens as well. The interest rates for senior citizens deposits are higher than the regular account. For this, the minimum amount and tenure are fixed by the bank. The interest on RD is compounded on quarterly basis. Most banks offer senior citizens an additional interest rate of 0.25% to 0.75%, as compared to regular recurring deposits.
Read on to know more about RD On Senior Citizens
Flexi Recurring Deposit schemes are a type of Recurring Deposit that allow the depositor to invest a flexible sum of money depending on his convenience. They allow the depositor to choose the core investment amount as well as the flexible installments in multiples of the core installment amount. For example, if the depositor chooses Rs. 500 as the core amount, he can choose to make a deposit of Rs. 500 or its multiples for his next deposit.
This scheme offers depositors a choice on how much to invest depending on their means every month, while maintaining a stable interest rate. The interest rate payable is fixed for the core amount while the interest on the core multiples amount would be calculated based on the duration of the investment.
There are a number of banks that offer flexi Recurring Deposit schemes with varying tenures and conditions.
Read on to know more about Different Bank's Flexi RD
Recurring deposit is one of the simplest and easiest financial products to invest in. Usually the experts advise the depositor to invest in short-term tenure that has an attractive interest rate to offer.
Yes, the interest earned recurring deposit is taxable.
Yes, TDS of 10% is applicable on the interest earned on Recurring Deposits. The TDS will deducted if the interest earned on the Recurring Deposits is more than Rs.10,000.
The minimum tenure for Recurring Deposit (RD) differs from bank to bank. Most banks offer RD schemes for a minimum tenure of 6 months or 12 months.
The interest rate for Recurring Deposit differs from bank to bank. The amount of interest that you can earn depends on the amount you have deposited in the RD account, the tenure of the RD and the interest rate offered by your bank for that tenure.
The minimum amount required for opening a Recurring Deposit account varies for every bank and it can be as low as Rs.10
Anyone can open a Recurring Deposit (RD) account. Some banks allow people to open a joint RD account and people can also open this account in the name of their minor child.
The maturity amount is calculated by banks on the basis of the instalment, account type and tenure chosen by the depositors.
Yes, generally banks in India provide an additional interest rate on Recurring Deposits to senior citizens.
Yes, you can withdraw your Recurring Deposit before the term is over. However, banks generally do not permit partial withdrawal.
Yes, you can add nominees in your Recurring Deposit account.
A depositor can submit an application to the bank requesting premature withdrawal of the recurring deposit account. The return on the principal amount invested by the depositor will only be provided for the period the money was deposited in the recurring deposit account in the bank. The interest rate will also be applicable for the same term period.
Yes, tax can be saved on recurring deposits if the money is deposited for a medium-term or long-term tenure in the recurring deposit account.
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The government has reduced the interest rates for small savings schemes effective July 1st, 2017. The rates were reduced by 0.1% across the board.
Schemes such as the Public Provident Fund (PPF) will now fetch interest of 7.8% for the period July-September 2017. Kisan Vikas Patra will fetch 7.5% interest and will mature in 115 months according to a notification by the Finance Ministry.
The 5-year Senior Citizens Savings Scheme will now fetch 8.3% interest, which will be paid quarterly.
Term deposits will now fetch between 6.8% to 7.6% interest for tenors ranging between 1 to 5 years. Recurring deposits for tenors over 5 years will now pay interest of 7.1%.
Savings deposits rates have not been revised and remain at 4% p.a.
30th June 2017
The government has permitted district co-operative banks to deposit banned notes with the RBI for a month as long as the notes were collected before December 30th, 2016, according to a statement from the Finance Ministry.
The statement also included the post office as well as district central co-operative banks in its notification. The banks will receive the exchange value which would be credited to the post office’s/bank’s accounts. The bodies would have to provide a valid reason for not depositing the notes earlier, and if this reason is found satisfactory the RBI would allow the deposit.
A number of co-operative banks still have significant amounts of demonetised cash and had been strapped for cash since they had no way to convert the now worthless money into legal tender. The new notification will come as a much-needed breather for these banks, who were unable to make payments towards a number of social welfare schemes due to paucity of funds.
21th June 2017
The CCBL daily deposit saving scheme was launched in Jammu by the deputy Commissioner Rajeev Kumar Ranjan.
The main objective of this scheme is to encourage businessmen and other professional to actively save a part of their income on a regular and disciplined basis. Some of the features of this new offer include door-step services, premature withdrawal facility and automatic transfers. There is no need to hold a minimum balance to avail these facilities and daily deposits can be as low as Rs.100.
Apart from this, loans can be taken on the savings scheme after the completion of three months. There will be no additional processing charges for loans taken.
10th June 2017
Some of the leading banks of India stated that they will be charging an amount of Rs.150 for all the cash withdrawals and deposits after 4 free transactions every month. This fee is being added so that cash dealings can be reduced in the country. The rate at which money will be deducted is Rs.150 or Rs.5 per transaction of Rs.1,000, whichever is lower.
Transactions that are carried outside the home branch will be associated with this new fee. As per HDFC Bank, home branch refers to the branch where you opened the account, where, ICICI defines it as any branch in the city where you have an account.
2nd March 2017
Dharmendra Pradhan, the Petroleum Minister stated in the Lok Sabha that has 6,811 Kisan Seva Kendras have been set up by the Indian Oil Corporation. He added that Indian Oil Corporation is going to set up memorandum of understanding with State Bank of India for starting SBI customer service points.
21st November 2016
Late evening on November 8th, Prime Minister Narendra Modi announced the demonetizing of the Rs.500 and Rs.1000 notes. This move was made in an effort to remove counterfeit currency notes circulating in the economy and further the war on corruption in the country. It is speculated that a large portion of the counterfeit notes are used to fund terrorist activities against the nation and this step is also, in part, taken as a security measure. Individuals have a 50 day window (November 10th to December 30) to exchange all Rs.500 and Rs.1000 currency notes in their possession with any bank or post office. Individuals will need to produce a government issued identity card in the form of Driver’s Licence, Voter ID, Aadhaar Card, Passport etc. while making the exchange. The old Rs.500 and Rs.1000 currency notes will be replaced by new Rs.500 and Rs.2000 currency notes. The new currency notes will be in circulation after November 11th, when banks will resume business operations.
8th November 2016
Reserve Bank ordered Mythri Credit Union Rural Women Banking (Mythri Scheme) to be closed down. It was run by Ernakulam Social Services Society or ESSS, which is a social branch of Varappuzha archdiocese. The closure of the scheme was mainly due to alleged misappropriation of the funds of the investors. Sebi henceforth forwarded the case to inspector general at the department of registration, Thiruvananthapuram, for actions to be taken further.
6th November 2016
A number of small savings schemes are finding it difficult to hold their ground with the new rate dynamics. The ones that lost their 25 basis points interest rates spread edge over G-Sec rates performed very poorly in March and the fact they have no Section 80C tax break have affected them adversely. The group of schemes that fall under this category comprises of time deposits with a validity of one year, two years and three years, Kisan Vikas Patra, recurring deposits along with the Post Office Monthly Income Scheme.
31st July 2016
Narmada-Jhabua Gramin Bank (NJGB) opened its 380th branch on Saturday. The branch was opened at Kamed village and this makes it the 59th branch in the Indore-Ujjain area. This branch will help meet the rising banking needs of the customers in the region. The bank provides a number of banking products along with higher interest rates than other banks. Some of the products include savings accounts, current accounts, recurring deposits and fixed deposits. The bank also sanctions loans for the purpose of solar pumps, warehouses, agricultural equipment, sprinkler irrigation systems, milk processing plants, orchards, horticulture, greenhouses, animal husbandry and more. The new branch will also offer lockers, NEFT and RTGS.
31st July 2016
Recurring Deposits have come out shining over the past two years as the returns on popular equity mutual funds have not been on par. Though RDs cannot be compared to equity schemes as the risk factors are different, recurring deposit returns though humble have been better than the returns from these schemes. Equity schemes also need a much longer period than 2 years to be judged more accurately, but the data is still interesting to see how these investments fair. HDFC Equity, the largest equity scheme in India, turned around a cumulative amount of Rs.25,000 through SIP from May 2014 to May 2016, clocking in a loss of close to 1%. Reliance Equity also recorded a loss of close to 1.75%.
31st July 2016