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  • 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.

    Best Banks to Open a Recurring Deposit Account

    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

    Recurring Deposit

    Features of Recurring Deposit

    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:

    3 Important Factors to Check Before Applying for RD

    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.

    Recurring Deposit: Eligibility Criteria

    Recurring Deposit: Documents Required

    Recurring Deposit Formula

    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

    Partial Withdrawal of Recurring Deposit

    Tax Saving Recurring Deposit

    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

    Recurring Deposit Calculator

    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.

    Benefits of Investing in Recurring Deposit

    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:

    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 Tips

    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.

    FAQs on Recurring Deposit

    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.

    11. How can a depositor withdraw the principal amount deposited before its maturity in a 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.

    12. Can tax be saved on recurring deposits?

      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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