• Recurring Deposit Vs. Chit Fund

    Saving money is an important aspect of life. Investing money is a desire of many. In India, many people are not yet involved in the organised financial sector. Many people of the lower income bracket opt to invest in chit funds because they do not qualify or have documentation for a bank account. Chit funds are not necessarily a bad investment. It has a bad reputation because it has been misused in the past to scam naive investors. There are Government-run and registered chit funds that are safe to invest in. On the other hand, recurring deposits are a much safer investment. The returns are fixed and guaranteed at the end of the tenure. But both investments have their pros and cons. Let’s take a look into the differences between the two options.

    Recurring Deposit VS Chit Funds

    Recurring Deposits

    A safe investment wherein a depositor invests a fixed sum every month with the bank. The sum accumulates gathering more interest over the tenure. When the deposit matures, the lump sum is paid out to the investor. There are options to reinvest the money in an FD or start a fresh recurring deposit. For example, an RD is opened with Rs. 1,000 per month at 8% interest for a tenure of 1 year. Upon maturity the sum payable is 12,530. Rs. 530 is the interest earned over a period of 1 year.

    Investment

    Rs. 1,000

    Tenure

    12 months

    Interest earned

    Rs. 530

    Total savings

    (1,000 x 12) + 530 = Rs. 12,530

    Chit Fund

    A savings-cum-loan scheme in which a number of contributors come together to invest a fixed sum every month. The money is collected from the chit group and is put up for auction every month. The investor who bids the lowest for the total sum will win the lot. A commission has to be paid to the Chit Fund Company. The surplus is distributed to all other investors. The winner of the bid cannot bid the next month. In this case, the amount you win becomes a loan that you will repay through the rest of the tenure. On the other hand, if you do not bid, then it becomes like a recurring deposit and you will receive your investment at the end of the chit fund. Your returns depends on the distributable surplus every month. With chit funds, there is no fixed return on investment.

    For example, 20 contributors invest in a chit fund for 12 months paying Rs. 1,000 each. In the first month, the fund is at Rs. 20,000, and the lowest bid goes at Rs. 17,000. 5% of the chit fund, or Rs. 1,000 in this case, has to be paid to the organiser. The remaining Rs. 2,000 will be distributed among 19 investors amounting to Rs. 105 approximately. So for the first month, the 19 investors actually contributed only Rs. 895 to the chit fund. This process repeats through the tenure of the chit fund.

    Comparison Between RD and Chit Fund

    Particulars

    Recurring Deposit

    Chit Fund

    Purpose

    Only investment

    Serves as investment and loan

    Type of Investment

    Safe

    Risky

    Type of returns

    Fixed returns

    Returns depend on bidding, lotteries and distributable surplus

    Guarantee

    Guaranteed profit

    Profit or loss

    Interest rate

    Higher rate of interest

    Relatively lower rate of interest

    Fees

    No processing charges

    5% of the chit fund must be paid as commission fees to the organiser every month

    Government regulation

    Governed by terms and conditions of the bank

    Governed by The Chit Funds Act 1982

    Taxable income

    No TDS, but the interest earned is taxable.

    Generally non-taxable but must be declared.

    Conclusion

    It is safer to invest with a bank which ensures your money is safe and guarantees you a fixed return. In the case of chit funds, you must have knowledge about how it functions. Some chit funds turn out to be scams and you can lose your money. Choose your fund wisely by checking if it is run by the state government or if it is registered under The Chit Funds Act. In some cases, some investors who have already won the bid, fail to invest further which leads to the chit fund failing. However, this has been regulated by compulsory collateral or another investor’s guarantee. Investing in a chit fund may result in a profit, but can also result in a loss. If you win a bid and end up investing more than what you got, then the chit fund becomes a loan. The loss can be considered interest payable on the loan. The Government in association with nationalised banks are taking measures to bring the rural and lower income groups into the organised financial sector. This will enable these segments to have access to banking facilities and safe investments.

    Read More Article on Recurring Deposit

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    RD Reviews

  • Page 1 of 50 1 2 3 4 5
    • ICICI Bank Recurring Deposit
      "Wonderful"
      ICICI BANK
      0.5 5.0/5 "Blown Away!"
      I have the recurring deposit account with the ICICI bank and the interest rate is good. Online banking services are good one with the ICICI bank. I dont think about the interest rate and other aspects. Everything is better one with the ICICI bank.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Feb 15, 2018
    • HDFC Bank Recurring Deposit
      "Hassle Free experience"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      HDFC recurring deposit interest rate is nominal, I opened account through online, their notification part is good. I make the monthly investment around Rs. 15000 for the tenure of 24 months. At last I got the return got credited in the account.
      Was this review helpful? 0
      , mumbai
      Reviewed on Feb 15, 2018
    • ICICI Bank Recurring Deposit
      "Excellent"
      ICICI BANK
      0.5 5.0/5 "Blown Away!"
      I am having the recurring deposit account with the ICICI bank. I am depositing rs 2,000 monthly. This policy I have takern for 25 years. The returns and policy benefits are very good. Customer service is very good.
      Was this review helpful? 0
      , chennai
      Reviewed on Feb 10, 2018
    • HDFC Bank Recurring Deposit
      "Good Service"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      First time I opened RD in HDFC, but the return was less. They offered me the interest rate around 6.5%, Then I quite in amount, I activated this service through online and once cancel it the amount got credited in a month. The service is absolutely fine but interest rate is the concern.
      Was this review helpful? 0
      , mumbai
      Reviewed on Feb 09, 2018
    • SBI Recurring Deposit
      "Good "
      STATE BANK OF INDIA
      0.5 4.5/5 "Excellent!"
      For more than five years of time, I am having the recurring deposit with the State bank of India and I have not found any loopholes with them. I would like to say that the online portal is good one for with the State bank of India.
      Was this review helpful? 0
      , new delhi
      Reviewed on Feb 07, 2018
    • ICICI Bank Recurring Deposit
      "Best"
      ICICI BANK
      0.5 5.0/5 "Blown Away!"
      I am having the recurring deposit account with the ICICI bank and the customer service is good one. I would like to say that the online banking services are also good one with the ICICI bank and I have not faced any such issues with them till now.
      Was this review helpful? 0
      , chennai
      Reviewed on Feb 06, 2018
    • SBI Recurring Deposit
      "Good"
      STATE BANK OF INDIA
      0.5 4.0/5 "Great!"
      I have my salary account with State Bank of India. The customer service was okay. I am using this account for 20 years and It is a zero balance account. I use a domestic debit card. The daily withdrawal limit was happy. ATM services are convenient and good. They don't charge for IMPS and NEFT transfer.
      Was this review helpful? 0
      , raigarh
      Reviewed on Feb 06, 2018
    • SBI Recurring Deposit
      "Excellent"
      STATE BANK OF INDIA
      0.5 5.0/5 "Blown Away!"
      I am having the recurring deposit account with the State bank of India and the customer service is good one. Response is fine one for me with them. I would like to say that the online portal is also really easy to access.
      Was this review helpful? 0
      , thane
      Reviewed on Feb 06, 2018
    • HDFC Bank Recurring Deposit
      "Best one"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I was having the recurring deposit with the HDFC bank on that time. Rate of interest was around 6.9% and the customer service was good. Penalty charges were around 1% of the interest rate charges on accumulated money.
      Was this review helpful? 0
      , new delhi
      Reviewed on Feb 02, 2018
    • HDFC Bank Recurring Deposit
      "nice recurring deposit"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I had a Recurring deposit in Hdfc Bank. I got satisfied Interest rate in Recurring Deposit. I can monitor this Recurring Deposit Activities in my Hdfc Mobile Banking application. I can check the status of my deposit maturity status and interest certificate also.
      Was this review helpful? 0
      , chennai
      Reviewed on Jan 31, 2018
    • SBI Recurring Deposit
      "Good service"
      STATE BANK OF INDIA
      0.5 4.0/5 "Great!"
      I have a Recurring Deposit with SBI from last 7-8 years, the experience was good so far and i did not face any issues with this bank. Customer support team gave all the right information and there was no delay in the services. I pay an amount of Rs 8000 every month and i get 9% interest on returns and i am satisfied with it.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jan 23, 2018
    • IOB Recurring Deposit
      "Excellent banking"
      INDIAN OVERSEAS BANK
      0.5 5.0/5 "Blown Away!"
      I have opened a Recurring deposit with Indian Overseas bank.I have been holding this account for last one year.I need not maintain any balance in this account as mandatory,this is on a cumulative basis.I have a good experience talking to the bankers.
      Was this review helpful? 0
      , mumbai
      Reviewed on Jan 23, 2018
    • HDFC Bank Recurring Deposit
      "Good service"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I had a Recurring Deposit with HDFC bank 3 years back, the services are very good with this bank and i did not find any issues with this bank. I pay an amount of Rs 4200 every month and the maturity period is after 5 years. Customer service was good and they responded on time. I get interest of 9% which is sufficient and i am happy with the returns.
      Was this review helpful? 0
      , ahmedabad
      Reviewed on Jan 19, 2018
    • ICICI Bank Recurring Deposit
      "Good service"
      ICICI BANK
      0.5 4.0/5 "Great!"
      I have a Recurring Deposit from ICICI bank from last 3 years, the services are pretty good when compared to all other banks. I pay an amount of Rs 1500 every month and the interest rate is satisfactory. Customer service is good and they responded on time. I am happy with the returns with this bank which is 9%.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 18, 2018
    • Axis Bank Recurring Deposit
      "Recurring Deposit with AXIS"
      AXIS BANK
      0.5 4.5/5 "Excellent!"
      As I'm holding my salary account with AXIS Bank I decided to maintain a Recurring Deposit account with them. Now I have this account for the past 1 year. They offer me 7 to 8% interest. The funds were auto debited from my salary account to RD account. The interest rates can be improved. Their customer care service is pretty good although they don't bother much about customer satisfaction. Despite being a salary account holder for 2+yrs, they haven't offered me any credit card so far. I am only having their Neo card which is the most basic one. NOT COOL AXIS !!!!!
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 17, 2018
    • Union Bank of India Recurring Deposit
      "Good service"
      UNION BANK OF INDIA
      0.5 3.0/5 "Satisfactory"
      I had a Recurring Deposit with Union Bank of India and the experience was quite good. I pay an amount of Rs 3000 every month and in return i get a certain amount with the interest of 7.5% which is satisfactory. Customer service was fine and they responded on time. The maturity of the RD is 1 year and i am satisfied with the returns.
      Was this review helpful? 0
      , mumbai
      Reviewed on Jan 12, 2018
    • HDFC Bank Recurring Deposit
      "Excellent"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I have opened a Recurring Deposit with HDFC Bank. The maturity period is one year and it was taken for my daughter. I am paying 1000 rupees per month through net banking or cash. All the facilities are good with HDFC Bank. The customer service and response was very good.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 04, 2018
    • Vijaya Bank Recurring Deposit
      "Good"
      VIJAYA BANK
      0.5 4.0/5 "Great!"
      I have taken Recurring Deposit account with Vijaya Bank. I am paying 20,000 rupees for 6 months. The interest rate was nominal compared to other bankers. The customer service and response was good. The premium amount was paid through ECS.
      Was this review helpful? 0
      , chennai
      Reviewed on Jan 02, 2018
    • HDFC Bank Recurring Deposit
      "Good"
      HDFC BANK
      0.5 4.0/5 "Great!"
      I have taken a Recurring Deposit with HDFC Bank long back. Everything is renewed and reimbursed with them. I have chosen this bank, it was very easy to use the net banking and the interest rate was good. I have taken this account through online and I hardly visit the branch to exchange the foreign currency.
      Was this review helpful? 0
      , navi mumbai
      Reviewed on Dec 29, 2017
    • HDFC Bank Recurring Deposit
      "Best "
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I do have recurring deposit account with the HDFC bank and the response is fine one. I would like to say that the rate of interest is good one for me with the HDFC bank. Everything is fine one for me with the HDFC bank.
      Was this review helpful? 3
      , hyderabad
      Reviewed on Dec 22, 2017
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