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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.

    RD VS SIP

    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

    Difference Between Recurring Deposit and SIP
    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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    • review Saving Account
      "Good"
      HSBC BANK
      0.5 3.0/5 "Satisfactory"
      My salary account was maintained with HSBC Bank for 7 years. Face to face banking experience is really good with HSBC Bank. They don't have option for IMPS transfer on online banking. Whenever I login the net banking, it ask for OTP due to security purpose which is unnecessary and not required.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 20, 2018
    • HDFC Bank Two Wheeler Loan
      "Need to reduce charges"
      HDFC BANK
      0.5 3.0/5 "Satisfactory"
      I had taken a Two wheeler loan with HDFC bank.The loan amount is 70,000 i had closed the loan long back.The EMI is paid through online.I would not recoothe service as they have too many charges on my account and they don't give proper response to the customers.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 20, 2018
    • Standard Chartered Bank Personal Loan
      "Average"
      STANDARD CHARTERED BANK
      0.5 3.0/5 "Satisfactory"
      I had applied for a personal loan with Standard Chartered Bank through online. I had to followup a lot and they took long time to disburse my loan. The customer service was not up to the mark. The documents are collected by the executive at doorstep. The part payment and pre closure option is average. There is a penalty for pre closing. Part payment I cannot more than 25% in the first year.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 20, 2018
    • Liberty Videocon Two Wheeler Insurance
      "Good policy"
      LIBERTY VIDEOCON GENERAL INSURANCE
      0.5 4.0/5 "Great!"
      I have taken Two Wheeler Insurance with Liberty Videocon Insurance.I have it for last year.I pay a premium of 1500 in year.The payment is done through online.I get a good policy coverage amount of 50k.The customer service respond on time.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 20, 2018
    • review Other Loan
      "Good service"
      PAYTM PAYMENTS BANK LTD
      0.5 4.0/5 "Great!"
      I use Paytm for quite a few years,most of time i use paytm for ordering food online at restaurants,to book tickets and also for booking movie tickets,recharges and electricity bills.The website is easy to understand and navigate and never faced technical issues.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 20, 2018
    • HDFC Bank Credit Card
      "Good card to use"
      HDFC BANK
      0.5 4.0/5 "Great!"
      I have taken HDFC bank credit card they had offered a limit of 60,000.I have been holding this card for last three years now they have increased to 97,000.I need pay an annual fees to hold this card.Net banking is user friendly.I get best offers.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 20, 2018
    • Bank Bazaar Credit Card
      "Good service"
      HSBC BANK
      0.5 4.0/5 "Great!"
      The website is very useful to choose right products with aright bank.The credit card is dispatched on time through bank bazaar.The executives give prompt response to the customers.I ma overall satisfied with the service of the team.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 20, 2018
    • HSBC Bank Credit Card
      "Good service"
      HSBC BANK
      0.5 5.0/5 "Blown Away!"
      I have taken a credit card with HSBC.The limit is 97,000.The card is applicable for an annual fees.I got many offers but i have v not availed those offers.They had processed the card within a week post submitting documents.Net banking is user friendly.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 20, 2018
    • Standard Chartered Bank Personal Loan
      "Excellent"
      STANDARD CHARTERED BANK
      0.5 5.0/5 "Blown Away!"
      I had applied my personal loan through online channel. I hold a salary account with Standard Chartered Bank. It was an excellent experience on my personal loan. The rate of interest was good and they offered around 13%. I am completely happy with the bank service.
      Was this review helpful? 0
      , kolkata
      Reviewed on Jan 20, 2018
    • ICICI Lombard Car Insurance
      "Good insurance"
      ICICI LOMBARD GENERAL INSURANCE
      0.5 4.0/5 "Great!"
      I hold a car insurance with ICICI Lombard for one year. This insurance was suggested by the dealer. The customer service was okay not very good. There was no claim experience till now. I paid for bumper to bumper service. The IDV value is 3.5L which was good.
      Was this review helpful? 0
      , kolkata
      Reviewed on Jan 20, 2018
    • HDFC Bank Car Loan
      "Satisfactory"
      HDFC BANK
      0.5 4.0/5 "Great!"
      My car loan was taken with HDFC Bank before 3.5 years. The interest rate was normal. I have purchased Grand i10. I took 5L and the duration period is 5 years. I have to pay monthly premium as 10,772 rupees through ECS. The services are good on my car loan.
      Was this review helpful? 0
      , kolkata
      Reviewed on Jan 20, 2018
    • HDFC Bank Credit Card
      "Credit limit has to be increased"
      HDFC BANK
      0.5 3.0/5 "Satisfactory"
      HDFC has offered me a Platinum credit card. I am using this card for more than 5 years. I am not satisfied with the credit limit, I was expecting more than 3.5L. They don't charge annual fee. I have been using the card for online shopping, petrol and etc.
      Was this review helpful? 0
      , kolkata
      Reviewed on Jan 20, 2018
    • SBI Saving Account
      "Good"
      STATE BANK OF INDIA
      0.5 4.0/5 "Great!"
      I have a joint account with State Bank of India for past 3 years. It was accessed by me and my wife. I tried calling the customer service and no need to waiter on the queue. The response was proper. I had to maintain a minimum balance of Rs.2500 for every month.
      Was this review helpful? 0
      , kolkata
      Reviewed on Jan 20, 2018
    • HDFC Bank Saving Account
      "Good account"
      HDFC BANK
      0.5 3.0/5 "Satisfactory"
      I have a salary account with the HDFC Bank. I am using this account for more than 12 years. The customer service and response was average. I have taken a loan with them and the interest rate was average. It is a zero balance account. ATM services are good.
      Was this review helpful? 0
      , kolkata
      Reviewed on Jan 20, 2018
    • Bank Bazaar Personal Loan
      "Better"
      STANDARD CHARTERED BANK
      0.5 5.0/5 "Blown Away!"
      Everything was good with bankbazaar.com. The customer service and response was satisfactory. They process my application on time to the bank which was helpful to get a personal loan. The online portal is easy to access and good. Its recommendable to others.
      Was this review helpful? 0
      , kolkata
      Reviewed on Jan 20, 2018
    • Standard Chartered Bank Personal Loan
      "Beter"
      STANDARD CHARTERED BANK
      0.5 5.0/5 "Blown Away!"
      I had a nice experience with Standard Chartered Bank. But I haven't received the loan papers yet. They offered normal interest rate and there is no processing fee. The documents are collected by the executive. They disbursed the loan on the promised date.
      Was this review helpful? 0
      , kolkata
      Reviewed on Jan 20, 2018
    • Bank Bazaar Credit Card
      "Good service"
      INDUSIND BANK LTD
      0.5 4.0/5 "Great!"
      I have contacted bank bazaar for my credit card request.I have been using the website for last few months.They had immediately responded and they have suggested a good bank in the market.The options on the Website is very useful to operate, and its user friendly.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 20, 2018
    • IndusInd Bank Credit Card
      "Good card to use "
      INDUSIND BANK LTD
      0.5 4.0/5 "Great!"
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      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 20, 2018
    • SBI Car Loan
      "Best service"
      STATE BANK OF INDIA
      0.5 4.0/5 "Great!"
      I have taken a Car loan with State bank of India.The loan amount is seven lakhs,rate of interest is nominal as compared to others.They had deducted minimum amount of processing fees.I pay my EMI through an ECS payment.The loan process is simple with SBI.
      Was this review helpful? 0
      , chennai
      Reviewed on Jan 20, 2018
    • ICICI Bank Saving Account
      "Good service"
      ICICI BANK
      0.5 4.0/5 "Great!"
      I have opened a salaried account with ICICI bank.I have been banking with them for last seven years.I get good response from the customers.I use mobile App and i feel its a best bank to be with.I have enough ATM's located in my place.
      Was this review helpful? 0
      , chennai
      Reviewed on Jan 20, 2018
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