Recurring Deposits Your SIP’s in Fixed Deposits

Very similar to fixed deposits, recurring deposits are popularly opted by many people. This is most often because they do not have a fixed lump sum where they can invest their money one time. People who have regular and fixed monthly incomes usually opt for these types of accounts where they can also earn a high rate of interest, similar to a fixed deposit.

These people decide a fixed sum of money which they regularly deposit in the account. This amount, once decided cannot be altered in the future. Most often people choose a fixed date on which they deposit this sum of money in the bank. Recurring deposits are basically your SIPs in the form of fixed deposits.

The interest rate often depends on the maturity period and will be higher for longer periods. These rates of interest are pre-determined and cannot be changed at any given time during the tenure. When compared, fixed deposits offer higher returns than a recurring deposit.  

Thus, these amounts are non-flexibility and a person cannot even have partial withdrawal or pay more/less than the decided amount. However, recurring deposit schemes enable customers to increase their savings through the procedure of regular monthly deposits of fixed sum over a fixed period of time.

 In a fixed deposit where a person has to pay TDS (tax deductible at source) after the tenure has ended, is not needed in case of recurring deposits. It is always advisable to fix an affordable amount which can easily be paid on a monthly basis rather than set a high figure and over-commit. This may lead to future defaults which in turn may result in paying a penalty.

It is easy to open a recurring deposit with many people opening these accounts online. These accounts are most often suited for those salaried individuals who can only manage to save a few thousand Rupees every month. A person can also open a recurring deposit at a post office. NRI’s residing in the country can open such accounts under their NRE accounts with banks/financial institutions. They however, cannot open them at a post office. 

If a person applies for such an account online he/she can also make use of an online RD interest calculator which calculates the maturity value, i.e. the principal amount as well as the interest earned for the deposits that are made in the recurring deposits.