• 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
    • HDFC Bank Recurring Deposit
      "Best"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I do have the recurring deposit account with the HDFC bank and the customer service is very good. I have felt that the rate of interest is good one with the HDFC bank. There are no much strict tenure term with the HDFC bank.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jun 12, 2018
    • Axis Bank Recurring Deposit
      "Good Service"
      AXIS BANK
      0.5 5.0/5 "Blown Away!"
      I started a recurring deposit with the Axis bank. Every month 1000 will be debited from the account , there is no interest for the deposit. The process of opening the recurring deposit was easy and hassle free. It was done instantly.
      Was this review helpful? 0
      , kolkata
      Reviewed on Jun 08, 2018
    • review Recurring Deposit
      "Need to improve"
      STANDARD CHARTERED BANK
      0.5 2.0/5 "Expected more"
      Rate of interest with the Standard chartered bank for the recurring deposit account is around 6.9%. Response is also fine one too. Customer service is good too. Online banking is also good one with them but the features are not.
      Was this review helpful? 0
      , chennai
      Reviewed on Jun 07, 2018
    • HDFC Bank Recurring Deposit
      "One of the best recurring deposit account"
      HDFC BANK
      0.5 4.0/5 "Great!"
      I have the recurring deposit account with thge HDFC bank. I would like to say that the rate of interest is good one for me with the HDFC bank and the customer service is good one too. Minimum tenure is around six months of time.
      Was this review helpful? 0
      , chennai
      Reviewed on Jun 07, 2018
    • Oriental Bank of Commerce Recurring Deposit
      "Excellent"
      ORIENTAL BANK OF COMMERCE
      0.5 4.5/5 "Excellent!"
      I am having the recurring deposit account with the Oriental bank of commerce. Rate of interest is around 7.5%, also the response is good one. I would like to say that the minimum tenure is around four years of time. I am really happy with them till now.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jun 06, 2018
    • HDFC Bank Recurring Deposit
      "Good Service"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I've started a recurring deposit with the HDFC. I deposit 2000 every month. The amount will be auto debited form the account. The recurring deposit is very good for savings purpose. Overall it was really easy to start the recurring deposit with the HDFC bank.
      Was this review helpful? 0
      , chennai
      Reviewed on May 31, 2018
    • HDFC Bank Recurring Deposit
      "Good Service"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I was using the Recurring deposit with the HDFC bank. I was depositing 1000 rupees a month. I am not using this now. It is too easy to start an RD with HDFC . The payment gets auto debited every month. I never had any problems with the deposit and it is very good for savings purposes.
      Was this review helpful? 0
      , new delhi
      Reviewed on May 26, 2018
    • HDFC Bank Recurring Deposit
      "Good Service"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I have a recurring deposit with the HDFC bank. The interest rate is nominal. The EMI is Monthly Debited from the salary account. Opening the deposit was very easy and it was done online. Never had any issues with the service.
      Was this review helpful? 0
      , mumbai
      Reviewed on May 26, 2018
    • SBI Recurring Deposit
      "Good Service"
      STATE BANK OF INDIA
      0.5 4.0/5 "Great!"
      I have a recurring deposit with the SBI. I deposit 2500 every month, they offer a nominal interest rate of 6.5% per year. There no huge returns but it very good for savings purposes. I never faced any difficulty with their services. with respect to savings account.
      Was this review helpful? 0
      , mumbai
      Reviewed on May 22, 2018
    • HDFC Bank Recurring Deposit
      "Recurring deposit with HDFC"
      HDFC BANK
      0.5 4.0/5 "Great!"
      I have a recurring deposit with HDFC bank and the rate of interest which they provide for the account was around 6.75%. I have chosen the tenure for 30 months with a monthly EMI of 1500. I can withdraw the amount after 30 months or in between. The service was very easy and simple.
      Was this review helpful? 0
      , bangalore
      Reviewed on Apr 25, 2018
    • HDFC Bank Recurring Deposit
      "Recurring deposit with HDFC"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I have opened a recurring deposit with HDFC with a monthly EMI of 5000. The total tenure was for 2 years. The rate of interest which they were providing was 7.5%. We do withdraw the amount in between also there will not be any charges with them. The customer service and response with them is fine.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Apr 19, 2018
    • HDFC Bank Recurring Deposit
      "Best Service"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I have my ongoing Recurring Deposit with HDFC bank and i am investing from last 1 year, I pay an amount of Rs 1000 every month and the customer service of HDFC bank was very good, they gave all the right information and guided me well. The maturity period is after 1 year and i get a interest of 6.5% on returns.
      Was this review helpful? 0
      , ahmedabad
      Reviewed on Apr 09, 2018
    • HDFC Bank Recurring Deposit
      "Nice experience"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      I hold a recurring deposit with HDFC Bank and the process is good. I can open this account on the mobile application. There is a lock in period for a year and six month. The rate of interest is good and there are no hassles in the process. Overall good.
      Was this review helpful? 0
      , bangalore
      Reviewed on Mar 24, 2018
    • HDFC Bank Recurring Deposit
      "Good investment plan with HDFC"
      HDFC BANK
      0.5 4.0/5 "Great!"
      I have started a recurring deposit an investment plan with HDFC bank with a tenure of 1 years. The total rate of interest is which they provide for 1 year is 7%. Before completing the maturity period if i withdraw the amount, i am not sure about the withdrawal charges as i did not tried that. The customer service and response is fine.
      Was this review helpful? 0
      , bangalore
      Reviewed on Mar 14, 2018
    • HDFC Bank Recurring Deposit
      "Good investment"
      HDFC BANK
      0.5 4.0/5 "Great!"
      I have started a recurring deposit an investment plan with HDFC bank with a tenure of 2 years. The total rate of interest is 7%. After two years i can withdraw the amount. The customer service and response is fine. Before completing the maturity period if i withdraw the amount, i am not sure about the withdrawal charges.
      Was this review helpful? 0
      , bangalore
      Reviewed on Mar 14, 2018
    • HDFC Bank Recurring Deposit
      "Good"
      HDFC BANK
      0.5 3.5/5 "Pretty good"
      I had a Recurring Deposit in HDFC Bank and it was closed long back. I have paid 1000 rupees every month. After the maturity period I have received a minimal amount. It is useful for the saving purpose. The rate of interest was not good. I got a proper response.
      Was this review helpful? 0
      , bangalore
      Reviewed on Mar 01, 2018
    • HDFC Bank Recurring Deposit
      "Good service"
      HDFC BANK
      0.5 4.0/5 "Great!"
      I had a Recurring deposit with HDFC bank and my experience was good so far, the services provided by this bank is very good when compared to other banks. I pay an amount of Rs 2000 every month which gets auto deducted from the salary account. I get a interest of 6.99% and happy with the returns.
      Was this review helpful? 0
      , chennai
      Reviewed on Feb 27, 2018
    • Axis Bank Recurring Deposit
      "Excellent"
      AXIS BANK
      0.5 5.0/5 "Blown Away!"
      I have closed the recurring deposit with the Axis bank and I have good relationship with them. I would like to say that the rate of interest is a kind of tricky one and it was okay one for me with them. I am okay with their banking services.
      Was this review helpful? 0
      , chennai
      Reviewed on Feb 27, 2018
    • HDFC Bank Recurring Deposit
      "Nice experience"
      HDFC BANK
      0.5 5.0/5 "Blown Away!"
      The rate of interest is good at HDFC Bank for the recurring deposit. It is almost the same as other banks. The service online is good as I can open and close this account online without having to go to the banks. The overall process is fine and I am glad to bank with them
      Was this review helpful? 0
      , new delhi
      Reviewed on Feb 19, 2018
    • 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
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