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  • 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.

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    RD Reviews

  • Page 1 of 48 1 2 3 4 5
    • Bank of Maharashtra Recurring Deposit
      "Good Saving for Future"
      BANK OF MAHARASHTRA
      0.5 5.0/5 "Blown Away!"
      I directly visited to the Bank of Maharashtra for the RD opening, they are customer friendly. They updates everything on time, monthly I pay Rs. 7000 it has the term for 5 yeas. Then I will 9.2% of interest. Its been 10 years I am continuing with them.
      Was this review helpful? 0
      , kolkata
      Reviewed on Dec 05, 2017
    • HDFC Bank Recurring Deposit
      "RD services are good"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      The Recurring Deposit with HDFC came in after years of relatioship with this Bank. They have good return promised and the trust over them is high. You can easily close the account whenever you want and the amount would be disbursed immediately to your account. The netbanking facility can make things happen easily.
      Was this review helpful? 0
      , new delhi
      Reviewed on Dec 01, 2017
    • HDFC Bank Recurring Deposit
      "Excellent service"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I have opened a Recurring deposit.I have been banking with them for last one year.The rate of interest is 6.67% ,its beneficiary to the customer.I maintain a minimum balance of Rs 5000.Net banking is convenient to use.The phone banking service is comfortable to use.
      Was this review helpful? 0
      , mumbai
      Reviewed on Nov 28, 2017
    • SBI Recurring Deposit
      "Good"
      STATE BANK OF INDIA
      0.5 5.0/5 "Blown Away!"
      I have my car loan with SBI 3 years . The loan amount was5 lakhs and the rate of interest was 9.8% which was satisfactory .The customer service and responses was good . The pre closure is after 1 year and the processing fee was 1100. My overall experience was good.
      Was this review helpful? 0
      , pune
      Reviewed on Nov 20, 2017
    • HDFC Bank Recurring Deposit
      "Good Service"
      HDFC BANK
      0.5 4.0/5 "Great!"
      I have most of my banking products with HDFC bank. As I'm an employee as well as I liked HDFC bank's services I decided to start a reccurring deposit for my future savings with HDFC bank itself. If we book recurring deposit through online then we will get offers some like free deal, provogue bags or watches, vouchers. Annually I pay Rs. 3000 and I get an interest of 7.75%.
      Was this review helpful? 0
      , jammu
      Reviewed on Nov 20, 2017
    • ICICI Bank Recurring Deposit
      "Great banking service"
      ICICI BANK
      0.5 4.0/5 "Great!"
      It was almost seven years now with the ICICI bank on recurring deposit. The website was very good where I can get my statement. Android app could be better. I pay monthly around 8K via online banking. I like them for the service since I maintained my saving and salary account. The things could have been better with respective of email intimation.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Nov 18, 2017
    • SBI Recurring Deposit
      "Good service"
      STATE BANK OF INDIA
      0.5 4.0/5 "Great!"
      As I'm a long time customer with State bank of India for around 12 years and as I liked their banking services so I started a recurring deposit with State bank of India 5 years ago. I pay Rs. 3000 monthly and keep on renewing it after every year when the tenure ends.
      Was this review helpful? 2
      , faridabad
      Reviewed on Nov 18, 2017
    • IDBI Recurring Deposit
      "Average service"
      IDBI BANK
      0.5 3.0/5 "Satisfactory"
      I have a savings account with IDBI bank for the past 5 years. As a long time customer with IDBI bank I trusted them and invested some money recurring deposit with IDBI itself. I renew this recurring deposit account every year. I get a interest of 7% which is very less.
      Was this review helpful? 0
      , delhi
      Reviewed on Nov 17, 2017
    • SBI Recurring Deposit
      "Good service"
      STATE BANK OF INDIA
      0.5 4.0/5 "Great!"
      As I have a savings account with State Bank of India I started a recurring deposit account with them. But I'm really not sure about the interest rates they provide me but it's good for both my RD accounts in this State bank of India as well as the other bank IOC.
      Was this review helpful? 0
      , kolkata
      Reviewed on Nov 17, 2017
    • Kotak Recurring Deposit
      "Satisfactory & happy"
      KOTAK MAHINDRA BANK
      0.5 4.5/5 "Excellent!"
      They are giving 6% interest rate for the Recurring Deposit. It was a very good service with Kotak. The request has been placed online. I have chosen Kotak because they are giving more benefits and high potentials. The customer service and response is good.
      Was this review helpful? 1
      , kolkata
      Reviewed on Nov 16, 2017
    • SBI Recurring Deposit
      "Excellent in service , hike in interest rate"
      STATE BANK OF INDIA
      0.5 5.0/5 "Blown Away!"
      I have invested in recurring deposit and the return value is good based on the pre tax which was levied and it was levied based on certain circumstances. I would like to say that the customer service is good one with them, also I really dont have any issues on it.
      Was this review helpful? 1
      , bangalore
      Reviewed on Nov 16, 2017
    • Tamilnad Mercantile Bank Recurring Deposit
      "Excellent "
      TAMILNAD MERCANTILE BANK
      0.5 4.5/5 "Excellent!"
      The rate of interest is higher for RD with Tamilnad Mercantile Bank compared to others, I will get a good return. I pay 2000rupees per month.The statements will be sent out to my mobile number or email address . For the maturity period they will inform the customer 1 week before. Manager will call the customer directly. There is no compulsion for the customer it is based up on their own interest. It is a tenure of 7 years.
      Was this review helpful? 0
      , madurai
      Reviewed on Nov 13, 2017
    • HDFC Bank Recurring Deposit
      "Secure Deposit"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I have taken a recurring deposit with HDFC bank. The total tenure for this deposit is for 60 months. They have given a rate of interest of 7.90% and now its lowered to 6.75 percentage. Monthly from my HDFC savings account they will deduct that amount.
      Was this review helpful? 0
      , chennai
      Reviewed on Nov 08, 2017
    • Vijaya Bank Recurring Deposit
      "Excellent"
      VIJAYA BANK
      0.5 5.0/5 "Blown Away!"
      I had a recurring deposit from Vijaya Bank and the process for that was also good. I have no hassles with the bank as they have always been proper in their response to the customer. The benefits of this account is also fine and I no longer use the account. I have closed it.
      Was this review helpful? 0
      , bangalore
      Reviewed on Nov 06, 2017
    • ICICI Bank Recurring Deposit
      "Excellent service"
      ICICI BANK
      0.5 5.0/5 "Blown Away!"
      I never find any difficulty with my ICICI requiring deposit service I am using ICICI mobile application so the every transaction will be done through online so I don't need to contact their branch or their staffs their mobile application is very easy to use and user friendly it was totally a good experience with ICICI.
      Was this review helpful? 0
      , chennai
      Reviewed on Nov 01, 2017
    • Syndicate Bank Recurring Deposit
      "Good Service"
      SYNDICATE BANK
      0.5 4.0/5 "Great!"
      As I have a savings account with SYNDICATE BANK I started a recurring deposit account also with them. I have been holding this recurring deposit account for the past 8 months. I pay Rs. 500 for this recurring deposit account. I get an interest of around 8%.
      Was this review helpful? 0
      , guntur
      Reviewed on Oct 31, 2017
    • SBI Recurring Deposit
      "Not a good investment"
      STATE BANK OF INDIA
      0.5 2.0/5 "Expected more"
      I created this Recurring Depoist account some time back and the return I got was little disappointing. I had paid Rs.10000 every month and was expecting a 7.25% Interest. But at the end, after the cut of all taxes I recieved only 4.5% profit, which for me is pure waste of investment.
      Was this review helpful? 1
      , ghaziabad
      Reviewed on Oct 29, 2017
    • HDFC Bank Recurring Deposit
      "Good Service"
      HDFC BANK
      0.5 4.0/5 "Great!"
      I have my salary account with HDFC bank so I thought of holding a Recurring deposit account with them as their services are good. Now I have been holding a Recurring deposit account with them for the past 1 year. I remember for the last 6 months I'm paying between Rs. 1000 to Rs. 2000 monthly. They give me 5.25% as interest.
      Was this review helpful? 0
      , new delhi
      Reviewed on Oct 28, 2017
    • HDFC Bank Recurring Deposit
      "Good Saving"
      HDFC BANK
      0.5 4.0/5 "Great!"
      Holding Recurring deposit account with HDFC, I used to pay Rs. 3000 on every month, it has tenure of one year, But the interest rate is very low like the banks norms. I think HDFC Is providing 6% of interest for the RD account, I am using it only for the investment purpose.
      Was this review helpful? 0
      , pune
      Reviewed on Oct 25, 2017
    • HDFC Bank Recurring Deposit
      "Very good account"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      HDFC Bank is my corporate account and my salary account is with HDFC. The reason why I had chosen HDFC for the Recurring Deposit was because of the interest rate which is 6% and it is the best and we have to pay monthly 1200 . This Recurring Deposit request was placed online. I can also view my maturity instructions online
      Was this review helpful? 0
      , new delhi
      Reviewed on Oct 17, 2017
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