Advantages of Investing in Recurring Deposits

Recurring Deposit is one of the most preferred investment schemes available in India. Risk averse investors looking for a promising investment scheme with good returns choose Recurring Deposit because it is simple and is a straightforward financial product. Read on to find more about the advantages of investing in a Recurring Deposit scheme in India.

What is a Recurring Deposit and How Does It Work?

In a recurring deposit scheme, the investor deposits a set amount every month over a predefined tenure which generally varies between one year to five years. The recurring deposit scheme has one major differentiating point when compared to fixed deposits - in a fixed deposit scheme, the investor has to deposit a lump sum once and leave it untouched for a period of time. So, people who do not have a lump sum or people who are looking to invest a set amount every month usually prefer Recurring Deposits. The principal amount deposited is returned at the end of tenure along with the interest. Normally, the interest is calculated on a quarterly compounding basis for recurring deposits.

How to Open a Recurring Deposit?

All major private and public banks in India offer Recurring Deposit products for their customers. Also, India Post offers a very popular recurring deposit scheme in the name of Post office Recurring Deposit scheme. Follow the steps given below to open a recurring deposit account.

  • If you already have an account with the bank that you wish to open a Recurring Deposit with, you can contact the nearest bank branch or the bank’s customer service cell to open a recurring deposit account.
  • If you wish to open a recurring deposit account in a bank with you do not have an account with, you will have to contact the nearest branch and submit an application form. Also, you will have to submit basic KYC documents to open an account.
  • At the time of opening a recurring deposit account, the tenure as well as the monthly due amount (deposit amount) should be decided. Monthly payments for Recurring Deposits can be done online using ECS, online banking or fund transfer.

Advantages of Recurring Deposits

With banks offering an attractive interest rate for Recurring Deposit products, customers can gain the maximum out of their investments. Here are some of the advantages that come with Recurring Deposits.

  • Useful for Planning Short Term Goals

    Investing in a Recurring Deposit is completely risk free and gives guaranteed returns. Investing in Mutual Funds and Stocks might not be a safe option if you have short term investment goals. Because of this nature of RD, investors contemplating on short term goals in a time span of 1 to 3 years choose to involve in Recurring Deposit. Consider the situations given below, Recurring Deposit might just be the right financial product if you are planning to tackle short term situations that require financial assistance.

    • Yearly education fee for your kids
    • If you are employed, higher education costs
    • If you own a home, furnishing and renovation costs
    • Overseas vacation
    • Managing marriage expenses
  • Online Recurring Deposit Features

    With almost all popular banks offering online Recurring Deposit features, investing has just become easier. The customer can deposit money in Recurring Deposit account, close the RD account, open another RD, update information, view transactions, deposit details and do much more online. Think about making an investment and earning interest without even having to leave your home - investing in a Recurring Deposit is as easy as this.

  • Recurring Deposit Interest Rates

    Recurring Deposit interest rates depend on the tenure and deposit amount. In most cases, the Recurring Deposit interest rate is very similar to that of fixed deposits. Interest rates for RD vary from 7.25% to 9% depending on the bank and the plan chosen by the customer. Also, many banks offer higher interest rates for senior citizens. You can also use a RD calculator to find how much interest you will accumulate for the deposit amount, interest rate and tenure.

  • Ease of Investment

    In a Recurring Deposit scheme, the investor has to deposit a fixed sum every month which will build up a savings discipline. For salaried customers, it will be easier to set aside a particular amount every month as savings and for this, Recurring Deposit is the best option. Also, RD schemes come with guaranteed returns and the rate of interest for RD is locked in which will protect the investor from interest rate swings.

  • Flexible Recurring Deposit

    Some banks offer flexible Recurring Deposit schemes where the investor will not be penalized if the amount is not deposited during a particular month. Also, in a flexible RD scheme, you will be able to withdraw the amount from your RD account anytime you want.

Disadvantages of Recurring Deposits

A financial product comes with benefits, but will always have some flaws. Let us take a look at certain things that may be slightly discouraging, when you are taking recurring deposit as your saving instrument:

  1. Liquidity: When you deposit the money in an RD, you will never have the privilege to withdraw any part of the money until the term of the deposit is over. Hence, if you are looking for an easy liquidity instrument, recurring deposits are an absolute bad idea. On the other hand, if you want to discipline your savings this disadvantage may work to your benefit.
  2. Rate of Interest: The interest rate that you earn on recurring deposit is much lower that regular fixed deposit schemes, since your deposits are being made in small installments and not as a whole chunk.
  3. Stringent Monthly Installments: It is not possible in the case of recurring deposits to be able to change your deposit amount, regardless of your financial situation at the moment. With a fixed amount for investment each month, someone with chances of extra or less funds for the deposit should be discouraged from opting for this product.
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Customer Reviews

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  • review Personal Loan
    "Need to decrease interest rate "
    BAJAJ FINANCE LIMITED
    0.5 4.0/5 "Great!"
    BAJAJ FINANCE has offered a pre approved personal loan offer and I accepted for the same. I have taken this loan 2 months back. The process was smooth and submitted required docuemtns within 1.5 hrs amount was credited to my account with 1.64L with tenure period of 4 years. The rate of interest is 18% which is high. Fee was deducted of 9K. There is pre closure option after 30 days with charge of 4%. EMI need to pay the amount of 4K. The best which I would like to say is online process was done with short term.
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  • ICICI Bank
    ICICI Bank Personal Loan
    "Good service"
    ICICI BANK
    0.5 5.0/5 "Blown Away!"
    The tenure for ICICI personal loan is for 3 years, I have taken the loan for some personal purposes. I got my loan statements on time but the interest rate of the loan is 12% which is bit high for me. I wish the bank can reduce it up to 10%. Otherwise everything is good about the loan.
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  • RBL Bank Credit Card
    "Easy to convert for EMI "
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    0.5 4.0/5 "Great!"
    I got RBL card offer from BAJAJ Finance. I have been using this card past 10 months which is a life time free card. The credit limit is sufficient of 55K. EMI conversion is avail and I can convert via mobile app whenever required with nominal charge. I use this card for general purpose. Based on usage I get points but not yet redeem it.
    Was this review helpful? 81
    , chennai
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  • SBI Cards Credit Card
    "Good service"
    SBI CARDS
    0.5 4.0/5 "Great!"
    SBI credit card have offers and reward points but I have not redeem them yet, this is a domestic card, the credit limit is of 50000 which I am very much satisfied as per my need. I got my statement on time. I used this card for personal purposes.The card is very user friendly.
    Was this review helpful? 86
    , hyderabad
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  • SBI Cards Credit Card
    "Ok service"
    SBI CARDS
    0.5 5.0/5 "Blown Away!"
    I am using SBI credit card for more than three months, there are some reward points and offers in the card. I used this card for online shopping, fuel surcharge and groceries.The credit limit of the card is sufficient and I like the most about the card is that it is a life time free card and very good to use.
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    , hyderabad
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  • IndusInd Bank Credit Card
    "Ok service"
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    0.5 5.0/5 "Blown Away!"
    The bank agent suggest me to take credit card from INDUSIND and I have taken it because it doesn't have any annual fee. The offer and reward points are available in the card are good. I am satisfied with the limit of the card. I used the card for general purposes. But it will be nice, if the offers and reward points will be more.
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    , jaipur
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  • IndusInd Bank Credit Card
    "Good service"
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    0.5 5.0/5 "Blown Away!"
    I am using INDUSIND credit card for 3 months. The card have no offers available and also there is no rewards. The only benefit is that its a life time free card and the credit limit is only for 75000 I am not that satisfied as i expected to get around 1.5 lakh. Apart from the limit over all experience is good.
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    , chennai
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  • IndusInd Bank Credit Card
    "Excellent card"
    INDUSIND BANK LTD
    0.5 5.0/5 "Blown Away!"
    I have got INDUSIND credit card few months ago and I have used it for two months now ,the credit limit of the card is Rs.70000 which is a life time free card. The bank have informed me every details about the reward points and offers but I have not got any time check it. I am satisfied with their card service.
    Was this review helpful? 63
    , hyderabad
    Reviewed on Mar 21, 2020
  • ICICI Bank Credit Card
    "Good service"
    ICICI BANK
    0.5 5.0/5 "Blown Away!"
    Am having ICICI credit card for two years, I feel good and have not face any issues. The best part about the card is its a life time free card. I used to get my card statement on time. I used this card for shopping, groceries and for many other personal purposes.I am using the bank mobile app which function smooth and simple.
    Was this review helpful? 78
    , faridabad
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  • SBI Cards Credit Card
    "Good service"
    SBI CARDS
    0.5 5.0/5 "Blown Away!"
    I have used SBI credit card for 2-3 months, but I have not got any time to check about the offers available in the card. The limit of the card is 38000 and I am satisfied because its a life time free card. I used to get my card statement on time and the net banking is also working very well.
    Was this review helpful? 82
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  • IndusInd Bank Credit Card
    "Good service "
    INDUSIND BANK LTD
    0.5 4.0/5 "Great!"
    Since it is a life time free card offer from INDUSIND so I chosen it and applied through online. I received a call on time and they have done the verification process. Hence I received the card by 7 days, the credit limit is okay for me. Its easy to use for all purposes.
    Was this review helpful? 60
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  • Citibank Credit Card
    "Good "
    CITIBANK
    0.5 4.0/5 "Great!"
    CITI has provided good offers and benefits on 2 months before. So I chosen this card and applied through online. It is annual fee chargeable of 500 rupees bu there is waiver off option if I spend 30K within a year. The credit limit is 65K. There is EMI conversion avail for this card.
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  • HDFC Bank Credit Card
    "very good"
    HDFC BANK
    0.5 5.0/5 "Blown Away!"
    I have used credit card from HDFC bank for 1 year which is very good and also very comfortable, its a life time free card and lots of offers are available in the card. This card was suggested to me by my colleague. Mobile banking also functions very smooth.
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  • IndusInd Bank Credit Card
    "Average service"
    INDUSIND BANK LTD
    0.5 4.0/5 "Great!"
    INDUSIND bank credit card have an credit limit of of Rs.75000, there is no offers available in the card and it also have a charges of 3000 along with GST. I hardly receive any remainder messages for my bill payment due to that some time I could not pay my bill on time. I would advise them send my bill on time before the due date.
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    , bangalore
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  • Axis Bank Car Loan
    "Average"
    AXIS BANK
    0.5 4.0/5 "Great!"
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    , kolkata
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  • ICICI Bank Credit Card
    "Need to increase the credit limit "
    ICICI BANK
    0.5 5.0/5 "Blown Away!"
    I have been using ICICI card for more than one year. They have provided an annual fee chargeable card and waiver off option is applicable. The credit limit is okay of 50K. Since I need to do purchase about 45K on some of the month so this limit is not sufficient. I swipe the card for travel, shopping and fuel purposes. I have not opted for EMI conversion.
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    , kolkata
    Reviewed on Mar 21, 2020
  • Axis Bank Credit Card
    "Good card"
    AXIS BANK
    0.5 4.0/5 "Great!"
    I have been using AXIS bank credit card for 3 years, Its a life time free card so I applied the card through bank. The agent have informed me everything about the card. I used to get offers of 10% on petrol bunk and shopping.The limit of the card is Rs.45000 and I used to pay my bill directly through bank.I am also using their net banking which is very good.
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    , kolkata
    Reviewed on Mar 21, 2020
  • IndusInd Bank Credit Card
    "Good service"
    INDUSIND BANK LTD
    0.5 4.0/5 "Great!"
    I got INDUSIND credit card from few months ago.The card have an EMI conversion. I used the card for multi purposes like shopping, online payment, ticket booking. This is annually chargeable card, I am not satisfied with the credit limit of Rs.75000 as I am expecting more than than 1 lakh.
    Was this review helpful? 66
    , kolkata
    Reviewed on Mar 21, 2020
  • IndusInd Bank Credit Card
    "Excellent"
    INDUSIND BANK LTD
    0.5 5.0/5 "Blown Away!"
    I got a life time free card offer from INDUSIND bank hence applied through online on three months back. I received the call on time and the process was done on smooth. I got the card on exact time frame. The credit limit is sufficient and they provided good offers and benefit as well.I use this card for shopping and travel purpose.
    Was this review helpful? 54
    , kolkata
    Reviewed on Mar 21, 2020
  • RBL Bank Credit Card
    "Average service"
    RATNAKAR BANK
    0.5 1.0/5 "Really Bad"
    RBL credit card is a chargeable card, I always have to go to Bajaj Finance to pay my credit card bill. I am not satisfied with the customer service which has to be improved. I used this card when ever needed for shopping, fuel surcharge and bill payment.The limit of the card is fine.
    Was this review helpful? 89
    , ranchi
    Reviewed on Mar 21, 2020
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