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  • Recurring Deposit

    What is Recurring Deposit?

    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.

    Compare and Get Best Recurring Deposit (RD) Interest Rates in India

    When investing in a recurring deposit, the first thing to look for is the interest rates that are being offered. The table below will let you examine the top interest rates from various banks in Indian according to the tenure of the RD. (Interest rates as of 23 Aug 2017) - Check RD Rates Now

    Bank Tenure Highest Interest Rate  

    Allahabad Bank
    1 year to less than 3 years 6.75% Get Allahabad Bank RD Rates

    Andhra Bank
    1 year to 2 years 6.85% Get Andhra Bank RD Rates

    Axis Bank
    14 months < 15 months 7% Get Axis Bank RD Rates

    Bandhan Bank
    1 Year 7.5% Get Bandhan Bank RD Rates

    Bank of Baroda
    1 Year 6.9% Get Bank of Baroda RD Rates

    Bank of India
    1 Year & above but less than 2 Years 6.7% Get Bank of India RD Rates

    Bank of Maharashtra
    3 Years 6.25% Get Bank of Maharashtra RD Rates

    Bharatiya Mahila Bank
    1 Year to 3 Years 7% Get Bharatiya Mahila Bank RD Rates

    Canara Bank
    1 to 10 Years 6.9% Get Canara Bank RD Rates

    Central Bank of India
    1 Year to 2 years 6.6% Get Central Bank of India RD Rates

    CitiBank
    365 days to 731 days 5.25% Get CitiBank RD Rates

    City Union Bank
    1 Year 7.1% Get City Union Bank RD Rates

    Corporation Bank
    1 Year to less than 3 years 6.75% Get Corporation Bank RD Rates

    DBS Bank
    5 years and above 6.7% Get DBS Bank RD Rates

    Dena Bank
    5 Year to 10 Years 7% Get Dena Bank RD Rates

    Deutsche Bank
    5 years 7.5% Get Deutsche Bank RD Rates

    Dhanalakshmi Bank
    1 Year and above upto & inclusive of 2 years 6.75% Get Dhanalakshmi Bank RD Rates

    DHFL Bank
    1 Year to 10 years 7.75% Get DHFL Bank RD Rates

    Federal Bank
    1111 days 7% Get Federal Bank RD Rates

    HDFC Bank
    12 Months 6.9% Get HDFC Bank RD Rates

    ICICI Bank
    12 to 24 months 6.9% Get ICICI Bank RD Rates

    IDBI Bank
    1 Year 6.65% Get IDBI Bank RD Rates

    Indian Bank
    1 year 4.75% Get Indian Bank RD Rates

    Indian Overseas Bank
    1 Year 6.75% Get Indian Overseas Bank RD Rates

    IndusInd Bank
    1 Year 7.15% Get IndusInd Bank RD Rates

    Jammu and Kashmir Bank
    1 years to less than 5 years 6.75% Get Jammu and Kashmir Bank RD Rates

    Karnataka Bank
    180 days 6.90% Get Karnataka Bank RD Rates

    Karur Vysya Bank
    2 years to 3 Years and above 7% Get Karur Vysya Bank RD Rates

    Kotak Mahindra Bank
    1 Year 6.60% Get Kotak Mahindra Bank RD Rates

    Lakshmi Vilas Bank
    1 year to 10 years 7% Get Lakshmi Vilas Bank RD Rates

    Nainital Bank
    1 year to less than 2 Years 7.90% Get Nainital Bank RD Rates

    Oriental Bank of Commerce
    1 to 2 years 6.85% Get Oriental Bank of Commerce RD Rates

    Post Office
    1 Year to 5 years 7.10% Get Post Office RD Rates

    Punjab and Sind Bank
    1 year to 10 years 6.80% Get Punjab and Sind Bank RD Rates

    Punjab National Bank
    1 year 6.75% Get Punjab National Bank RD Rates

    Saraswat Bank
    Above 1 Years to 3 years 6.8% Get Saraswat Bank RD Rates

    South Indian Bank
    1 year to 2 years 6.75% Get South Indian Bank RD Rates

    State Bank of India
    1 year 6.75% Get State Bank of India RD Rates

    Syndicate Bank
    Above 2 years to 10 years 6.6% Get Syndicate Bank RD Rates

    Tamilnad Mercantile Bank
    1 Year to 10 Years 7% Get Tamilnad Mercantile Bank RD Rates

    UCO Bank
    1 Year 6.75% Get UCO Bank RD Rates

    Union Bank of India
    1 Year 7% Get Union Bank of India RD Rates

    United Bank of India
    1 Year 6.25% Get United Bank of India RD Rates

    Vijaya Bank
    1 to 5 years 6.5% Get Vijaya Bank RD Rates

    Yes Bank
    1 Year to 10 years 7.10% Get Yes Bank RD Rates

    Features of Recurring Deposit Account

    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:-

    1. Recurring Deposit schemes aim to inculcate a regular habit of saving among the public.

    2. Minimum amount that can be deposited varies from bank to bank. It can be an amount as small as Rs.10.

    3. The minimum period of deposit starts at six months and the maximum period of deposit is ten years.

    4. The rate of interest is equal to that offered for a Fixed Deposit and is hence higher than any other Savings scheme.

    5. 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.

    6. RD offers the additional benefit of taking loan against the deposit, i.e., by using the deposit as a collateral. About 80 to 90% of the deposit value can be given as loan to the account holder.

    7. The Recurring Deposit can be funded periodically through Standing Instructions which are the instructions given by the customer to the bank to credit the Recurring Deposit account every month from his/her Savings or Current account.

    Duration of Recurring Deposit

    Customers can open a Recurring Deposit account with a bank, where the compounding of interest will be done on quarterly basis. The deposit term starts with a minimum period of 6 months, and after that they can choose to increase the tenure in multiples of 3 months up to a maximum period of 10 years. The minimum period for a RD varies from bank to bank. Some banks specify 24 months as minimum duration.

    Eligibility for Recurring Deposit

    Most Indian banks offer resident Indians and HUF (Hindu Undivided Families), the opportunity to open a RD with them. Some banks even have RD schemes for children and in this scenario minors are also eligible to apply with guardians to supervise their finances.

    Compound Interest and Impact of Compounding frequency

    Most banks that offer Recurring Deposit usually compound interest on a quarterly basis. Compound interest is interest that is added to the principal amount so that from then on, the interest that has been added also earns interest. This addition of interest to the principal is called compounding.

    The following formula gives you the total amount one will get if compounding is done:

    Maturity Value of the Recurring Deposits - based on Quarterly Compounding)

    M = R [(1+i) n – 1]

    --------------------

    1- (1+i) -1/3

    Where,

    M = Maturity value

    R = Monthly installment

    n = Number of quarters

    i = Rate of interest/400

    Renewals and Withdrawals of Recurring Deposits

    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.

    Premature withdrawal of Recurring Deposit

    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. In RD premature withdrawal is possible however the interest rate offered would be less as compared to the normal base rate which is approximately 8.40% per annum (interest rates vary according to bank stipulations). However some banks would deduct interest rate by 1% to 2% for the period during which the deposit remained in the bank. Usually, the minimum lock-in period for a RD account is 3 months and if a premature withdrawal is made before this period, the account holder would earn zero interest and only the principal amount that was deposited would be refunded to him/her by the bank. In addition to penalty on interest, incentives offered on the RD are also cancelled.

    Partial withdrawal of Recurring Deposit

    Partial withdrawal of RD is not allowed by banks. While most banks do not allow partial withdrawal, other banks offer an alternative in the form of Loan or Overdraft facility which are made available by pledging the balance in RD account as collateral. Also, premature withdrawal is allowed at 1% penalty, for the period during which the deposit has remained with the Bank. Premature closure is allowed but with some penalty. While no bank allows you to make partial withdrawals, you can do so if you have a Recurring Deposit with a post office for at least a year. In fact, the withdrawn amount is considered a loan, which you can repay as a lump sum.

    You can withdraw prematurely, but the interest paid will be lower than the base rate for the deposit tenure or that for the tenure the deposit has been with the bank. Some banks may subject the deposit to a penal interest (1-2 per cent). A Recurring Deposit account has a lock-in period of one month. Premature closure in less than a month will not earn interest. Only the principal amount will be returned.

    About Nomination of Recurring Deposits

    The Recurring Deposit also comes with a nomination facility. Whether held singly or jointly, there can be only one Nominee for a deposit account. Account holders can change the nominee of the recurring deposit account and also make other changes by making a declaration which is effective in the appropriate form. A minor can be made a nominee of a recurring deposit account with a proper guardian cited to supervise.

    Loan against Recurring Deposit

    A loan or an overdraft, can be availed against the recurring deposit. An individual can avail a loan of up to 75 to 90% of the deposit amount, depending on the bank’s terms and conditions. This is a fruitful option, especially in case of emergency, as interest keeps getting credited and the loan is available at a lower interest rate, as compared to a personal loan.

    Read on to find more about Loan Against RD

    Income Tax on Recurring Deposit

    Tax Deducted at Source (TDS) is applicable for recurring deposits on the interest earned. The tax is paid according to the tax slab of the account holder. The TDS is effective from June 01, 2015. For instance, if the RD is for Rs 10,000, then 10% is deducted as TDS by the bank. Individuals whose income doesn’t fall under the taxable slab are required to submit Form 15G to avoid TDS being deducted on their recurring deposit accounts.

    Read on to know more about Income Tax on RD Rates

    Recurring Deposits for NRI/NRE

    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

    Senior Citizens 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

    Banks Providing Flexi RD

    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 FAQs

    1. Is interest earned on recurring deposit taxable?

      Yes, the interest earned recurring deposit is taxable.

    2. Is Tax Deduction at Source (TDS) applicable on the interest earned on Recurring Deposits?

      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.

    3. What is the minimum tenure for Recurring Deposit?

      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.

    4. How much interest can I earn through a Recurring Deposit account?

      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.

    5. What is the minimum amount required for opening a Recurring Deposit account?

      The minimum amount required for opening a Recurring Deposit account varies for every bank and it can be as low as Rs.10

    6. Who can open a Recurring Deposit (RD) account?

      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.

    7. How do banks calculate the maturity amount?

      The maturity amount is calculated by banks on the basis of the instalment, account type and tenure chosen by the depositors.

    8. Do Senior citizens receive extra benefits on their Recurring Deposits?

      Yes, generally banks in India provide an additional interest rate on Recurring Deposits to senior citizens.

    9. Can I withdraw my Recurring Deposit before the term is over?

      Yes, you can withdraw your Recurring Deposit before the term is over. However, banks generally do not permit partial withdrawal.

    10. Can I add nominees in my Recurring Deposit account?

      Yes, you can add nominees in your Recurring Deposit account.

    News About Recurring Deposit

    • Interest Rates For Small Savings Schemes Like PPF Reduced

      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

    • Co-operative Banks Can Deposit Banned Notes With RBI For Another Month

      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

    • New Savings Scheme for Businessmen in Jammu

      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

    • Axis, HDFC and ICICI Banks to Charge Rs.150 After Free Transactions

      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

    • Kisan Seva Kendras Set up By Indian Oil Corporation

      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

    • Exchange old Rs.500 and Rs.1000 for New Currency Notes

      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

    • Mythri Credit Union Rural Women Banking Case Forwarded to Inspector General, Dept. of Registration

      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

    • Small Savings Schemes Fail to Hold their Ground Following New Rate Dynamics

      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

    • NJDB Opens New Branch at Kamed Village

      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

    • RD returns overtake popular Equity Schemes

      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

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