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  • Difference Between Recurring Deposit and SIP

    Setting aside a fixed amount of money every month specifically for savings or investment is the best way to create wealth. Systematic Investment Program (SIP) in Mutual Funds and Recurring Deposits are two most popular ways to invest a fixed amount every month. In a SIP, the investor has to set aside small amounts of money either monthly or quarterly rather than having to invest a lump amount. In a Recurring Deposit scheme, a person deposits a fixed amount every month for a predefined period of time. At the end of the tenure, he gets back the interest and investment amount.

    For people willing to invest a fixed amount every month rather than a single time investment of huge amount, opening a RD, PPF or starting a SIP are the most preferred options.

    SIP Vs RD - Product Structure

    Recurring Deposits - In a Recurring Deposit scheme, the individual has to first choose the tenure and monthly deposit amount. Once the plan starts, the investor must deposit the amount every month over the tenure. Generally, the tenure varies from a minimum of 6 months and thereafter in addition of 3 months to a maximum tenure of up to 10 years. Recurring Deposit proves to be gentle on one’s pocket given that the investor decides the amount and also the risk is considerably low.

    Interest rates for recurring deposits are decided based on the tenure and deposit amount. The rate of interest for recurring deposit generally varies from 7% to 8% and senior citizens are offered a higher rate of interest. Recurring Deposit accounts can be started at banks or post offices. Unlike SIP, in RD you will know how much to expect at the end of tenure. For example, if you want to save a corpus of Rs. 3 lakh for an international trip, you can use a RD Calculator to decide how much you have to deposit every month and for how many years to save Rs. 3 lakhs.

    One of the main disadvantages of Recurring Deposits is the fact that it is not tax efficient. Interest income from RD is added to income for declaring tax liability and a TDS will be applicable on the RD interest if it exceeds Rs. 10,000.

    Systematic Investment Plan - A SIP can be chosen by investing in mutual funds. In a SIP, the investor has to deposit a small sum every month or every quarter and the amount of investment can be as low as Rs. 500. If you choose a mutual fund scheme and invest in SIP, based on the plan that you have opted for they will allocate your money in debt or equity. In recent times, equity mutual funds have generated good returns which have been in excess of recurring deposit or fixed deposit schemes. The returns generated by SIP mutual funds have been around 12% to 22% in the last 5 to 10 years. One of the main disadvantages of SIP lies in the fact that even if you keep depositing the amount, nothing can be promised and if the stock markets crash, you might end up losing more than what you get. Also, you will have to hold the fund for a long time to get good returns.

    Which is Better Systematic Investment Plan Or Recurring Deposit

    Factors Recurring Deposit (RD) Systematic Investment Plan (SIP)
    Investment Scheme In a RD scheme, you will have to invest in a deposit plan that will give you fixed rate of returns. You can also opt for flexible recurring deposit scheme if you are looking for more flexibility. In a SIP for mutual funds, you can choose between debt or equity type of funds depending on your risk capability.
    Risk Factor Recurring Deposits are not prone to risks and is one of the safest form of investment. Returns that you can expect from the SIP are variable. There can be a risk of capital and returns depending on the stock market. But, recent data shows us the SIP gives good returns if held for a long period of time.
    Investment Type In a Recurring deposit scheme, the investor has to deposit a fixed amount every month. Systematic Investment Plan is a way to put your money on mutual funds. Investment can be done on a periodic basis - daily, weekly, monthly or quarterly.
    Returns As the rate of interest is fixed in a recurring deposit scheme, the return is also fixed and known at the time of investment. The returns from a SIP for mutual funds is dependent on debt and equity markets and is also based on the fund scheme chosen by the investor.
    Liquidity Recurring Deposit is liquid but premature withdrawal or closure will attract penalty charges. In terms of liquidity, a SIP is better when compared to RD. SIP can be closed and the money can be withdrawn without any penal charges.
    Taxation Recurring Deposit amount or the interest earned on it are not exempted from tax. SIP investments and returns are exempted from tax only when invested on Equity Linked Savings Scheme (ELSS) funds.
    Instalment Frequency Recurring Deposit usually come with monthly instalments SIPs offer flexible instalment plans of daily, weekly, monthly, quarterly etc.
    Investment Goal Recurring Deposits usually serve short-term savings goal and do not help in long-term wealth growth. SIPs can help in all kinds of investments goals, whether short- or long –term, depending on the frequency of investment, funds chosen and other factors.
    Recurring Deposit - Sitemap

    Customer Reviews

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    • Bank Bazaar Customer Support
      " Credit card, Insurance"
      ALL BANKS
      0.5 5.0/5 "Blown Away!"
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      ,
      Reviewed on Jul 23, 2017
    • Bank Bazaar Customer Support
      "Great"
      CAPITAL FIRST
      0.5 4.5/5 "Excellent!"
      Great site, this will help the people to have one site with validation banks rather having different banks upload Need to have exposure from banks like how bankbazar reacts. Banks should also communicate the way bankbazaar works. All the best
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      , secunderabad
      Reviewed on Jul 23, 2017
    • Bank Bazaar Customer Support
      " One stop for loans/credit cards"
      CITIBANK
      0.5 5.0/5 "Blown Away!"
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      , hyderabad
      Reviewed on Jul 23, 2017
    • Bank Bazaar Customer Support
      "Best of Services bankbazaar.com"
      CAPITAL FIRST
      0.5 5.0/5 "Blown Away!"
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      , mumbai
      Reviewed on Jul 23, 2017
    • ICICI Bank Personal Loan
      "Very bad, bad and bad"
      ICICI BANK
      0.5 0.5/5 "Unacceptable"
      Hi all, I am serving Army man and approached the ICICI bank for the personal loan. They neglect me very badly. I am feeling very much ashamed. In my whole life I will never have a relation with such bank as they say they respect army, In reality they treat us like goons. My middle finger salute to ICICI.
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      , kolkata
      Reviewed on Jul 23, 2017
    • Kotak Credit Card
      "Worst Credit Card among all"
      KOTAK MAHINDRA BANK
      0.5 0.5/5 "Unacceptable"
      I am using various credit cards, amongst them the worst is Kotak Mahindra Card. Dont go for this credit card ever. An incident occured when I have to pay an amount of 11078 ruppes of which I paid 10000, so they charge a fine of 800 ruppes in that amount. When I spoke to customer care they said that you have to pay this amount and in case any problem you can close the credit card. I was out of my mind like what the service was this. Dont go for this credit card ever.
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      , gurgaon
      Reviewed on Jul 23, 2017
    • Citibank Personal Loan
      "Personal Loan process from citibank, as it is highly charged"
      CITIBANK
      0.5 1.0/5 "Really Bad"
      I hate taking loan from Citibank, also I will try to drop all my transactions that I make with citibank. Please avoid citibank banking. They will highly charge you when you are in need. I have been using citibank since 5 years once I need a loan and went for credit card loan they charged me 6 % more from outside market. i don't have options at that time so I was forced to take it. I closed the loan in 3 months due to high interest rate.
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      , hyderabad
      Reviewed on Jul 22, 2017
    • Bank Bazaar Customer Support
      "Excellent service ."
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      Always maintaining the needful support and services . We have an wonderful app designed to speed up the process of getting quick response and approval . Also it reduces the time ,I appreciate your time and effort which gives us a better banking experience.
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      , bangalore
      Reviewed on Jul 22, 2017
    • Bank Bazaar Customer Support
      "Hassle Free Car Loan"
      ALL BANKS
      0.5 4.5/5 "Excellent!"
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      ,
      Reviewed on Jul 22, 2017
    • Bank Bazaar Customer Support
      "Good"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      The call was quick and the Process was Pushed quick and instant Approvals was also great submitting documents online best of all that I think saved a lot of time and paper work Keep up the Good Work All the Best!!!Would definitely Recommend you guys .
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      , bangalore
      Reviewed on Jul 22, 2017
    • Bank Bazaar Customer Support
      "Superb"
      STANDARD CHARTERED BANK
      0.5 5.0/5 "Blown Away!"
      Instantly finished. Fast working. Process was very good. I don't know whether I am eligible for personal loan and also top up may be given to me or not. The bank bazaar mentioned the variation of each bank then only I select the best bank for emi rate of interest and repay the amount and also the eligibility, save money for a month, finally they are providing a T- shirt based on my review too.
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      , chennai
      Reviewed on Jul 22, 2017
    • Bank Bazaar Customer Support
      "Quick service"
      CAPITAL FIRST
      0.5 4.0/5 "Great!"
      Quick service in any aspect of any loans. Good service in all aspects of service related queries & good response on time.. Anyway many many thanks to bankbazaar for providing best service to their valuable customers.. I had a great experience with bankbazaar as I had received the calls on time to time regarding the process of my Loan application. It's a best oriented website giving all the facilities to takes different loans in all categories.
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      , hyderabad
      Reviewed on Jul 22, 2017
    • Bank Bazaar Customer Support
      "Nice good response really good and its trustworthy too "
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
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      , bangalore
      Reviewed on Jul 22, 2017
    • Axis Bank Credit Card
      "PATHETIC SERVICE"
      AXIS BANK
      0.5 0.5/5 "Unacceptable"
      ONE YEAR BEFORE I HAD ASKED FOR THE BANK AND CUSTOMER CARE EXECUTIVES FOR THE CHANGE OF BILLING DATE.MORE THAN 10 TIMES VISITED TO MAIN BRANCH AND CUSTOMER CARE TEAM ALSO NOT PROVIDING INFORMATION. IT'S EFFECTING YOUR BRAND IMAGE AND LOOSING HOPE DAY BY DAY. VERY STRANGE.
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      , vijayawada
      Reviewed on Jul 22, 2017
    • Bank Bazaar Customer Support
      "Good customer Service "
      AMERICAN EXPRESS BANKING CORPORATION
      0.5 5.0/5 "Blown Away!"
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      , chennai
      Reviewed on Jul 22, 2017
    • Bank Bazaar Customer Support
      "EXCELLENT WEBSITE"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
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      , vadodara
      Reviewed on Jul 22, 2017
    • Bank Bazaar Customer Support
      "Finance on phone Just click and tensions free"
      HDFC LIMITED
      0.5 4.5/5 "Excellent!"
      It's very easy to contact any bank for any reqirement and also the information about best schemes were also provided. It's also shown our eligiblity. I also got a credit card before 4 2month and now also applied for a home loan Thank all for your response and the Team of Bank Bazar Best Bank service provider of India.
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      , vadodara
      Reviewed on Jul 22, 2017
    • Bank Bazaar Customer Support
      "Apply for a loan "
      TVS CREDIT SERVICES
      0.5 5.0/5 "Blown Away!"
      This is a very fast and good service, for every person, we are very much thankful bank bazaar as it help us..so easy and understanding application every one can use it for apply new loan as per requirement more important every one can trust bank bazaar as it provides good service. Thanking you.
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      , ahmedabad
      Reviewed on Jul 22, 2017
    • Bank Bazaar Customer Support
      "Waiting"
      CITIBANK
      0.5 4.5/5 "Excellent!"
      I'm waiting for my loan to be approved I'll provide best feedback if approved I'll be very much glad to refer my friends and family regards to bankbazaar so that in future any loans are required I'll try to contact bankbazaar for any help thanks.
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      , bangalore
      Reviewed on Jul 22, 2017
    • Bank Bazaar Customer Support
      "Very good service"
      AXIS BANK
      0.5 5.0/5 "Blown Away!"
      I really appreciate bank bazaar.com, I am filling application online and we have don't face any issue we have completed form very normal and I see the result I am very glad to use the services of bankbazaar.com. Further, I would like to recommend my friend for this site.
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      , new delhi
      Reviewed on Jul 22, 2017
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