Looking at taking that first step into the world of financial planning without floundering helplessly in a sea of financial jargon? Then a Recurring Deposit is just the tool you are looking for. A Recurring Deposit is a deposit plan that enables investors to set aside a certain fixed amount each month for a specific period of time. The amount earns a fixed amount of interest. On completion of the tenure, the total amount is returned to the individual, as well as any pending interest that has accrued.
Recurring Deposits enable individuals to save in installments every month instead of making a lump sum investment at one go.
A number of Recurring Deposits are for tenures of 4 years and above, which some individuals find hard to keep up with. This also means that your money is blocked for a long period of time, since there are harsh penalties associated with making a premature withdrawal of funds.
A short term Recurring Deposit is a scheme where the deposit can be for a relatively short period of time.
As the interest earned is identical to that earned by a Fixed Deposit without the strict rules that govern an FD, a short term Recurring Deposit makes for a balanced financial tool.
Planning For Your Short Term Goals Using Recurring Deposits
A Recurring Deposit, being a short term investment option, can be used by individuals who wish to save a certain amount of money for a specific goal or purpose. A Recurring Deposit helps you meet a short term goal as a fixed amount of money is set aside for the duration of the deposit, ensuring savings that are used to satisfy the goal.
For example, if a short term goal is funding the purchase of a car, you can work towards its achievement by planning your RD accordingly. The cost of the car would be the target figure, and the time frame could be the duration of the RD, for example in two years’ time.
A set amount would be deducted from your account every month towards fulfilling the set goal. On maturation of the tenure, the principal lump sum as well as the interest accrued on the amount would be available for withdrawal, thus ensuring the achievement of the goal.
With the interest rate being similar to that of a Fixed Deposit, you would stand to receive a sizeable sum of money as interest, which would reduce the amount you would need to deposit each month.
Tenure for Short Term Recurring Deposits
A short term Recurring Deposit tenure is, as the title suggests, of a shorter duration as compared to a regular Recurring Deposit. With the average Recurring Deposit tenure being around 4-7 years, a short term RD could be from as little as 6 months to around 4 years.
Recurring Deposit tenures vary from bank to bank, and comparing rates and tenures would enable you to make an informed decision regarding the RD best suited to your needs.
The minimum requirement for a short term Recurring Deposit varies from bank to bank, with some banks keeping the minimum amount at as little as Rs.10. Some banks have a minimum deposit amount of Rs.100 whiles others keep it at Rs.500. The minimum amount could also differ if the RD is being opened by a senior citizen, in which case the amount could be relaxed or lowered.
Eligibility Criteria for Short Term Recurring Deposits
Individuals who wish to open a Recurring Deposit have to meet the eligibility criteria as defined by the specific bank. Individuals are also required to submit a set of documents for KYC compliance. The list of documents are mentioned below:
- Proof of identity.
- Proof of address.
- Recent passport sized photograph.
Short Term Recurring Deposit Interest Rates:
In an effort to simplify the process of looking for short term Recurring Deposit rates and their respective tenures for banks, a short list has been compiled below:
Short Term Recurring Deposit Interest Rates Table:
|ICICI Bank||SBI||HDFC||Axis Bank|
|Tenure||Reg||Sr Cit||Reg||Sr Cit||Reg||Sr Cit||Reg|
Please Note: Interest rates are subject to change at the discretion of the bank. Applicants are requested to check for current applicable rate at the time of application.
Individuals can thus choose a Recurring Deposit based on the tenure as well as the interest rate being paid out to fulfill a goal or as a savings tool, allowing for a regular source of saving every month.