What Are The Features And Benefits Of Recurring Deposits?

If there is any deposit offered by the bank is most popular after fixed deposits are recurring deposits. This kind of deposit works like an FD but is broken into deposits spread out over a longer period. Opening recurring deposits is simple, precisely why you must learn its features before deciding to invest in the same.

Features of RD account:

The RD provides fixed interest on the invested amount at a specified frequency till a fixed term or up to maturity. At the end of the term, the amount upon maturity, along with remaining interest, gets paid. Some of the features are as follows –

• The deposit aims to inculcate a regular savings habit among the individuals.
• The minimum deposit amount varies from bank to bank. The amount could be as small as INR 10.
• The minimum deposit period starts at six months, and the maximum deposit period extends up to 10 years.
• The interest rate is equivalent to the ones offered under fixed deposits. But they are higher than those which you receive under savings account.
• Premature and mid-term withdrawals are not allowed. However, the bank provides closure of account before maturity, sometimes inclusive of a penalty.
• The recurring deposit offers the additional benefit of a loan against the deposit, i.e., using the deposit as collateral. Around 80 per cent to 90 per cent of the deposit value can be used as the loan.
• You can fund the RD account periodically through standing instructions, which are the instructions offered by the customer to the bank to credit the account monthly from their savings account.

Factors to consider:

A recurring deposit is made available to the consumers as an investment product by the banks. The principal amount invested earns interest regularly, and the lump sum gets handed to the depositor at the time of maturity. Although the recurring deposit is a safe investment option, the returns are mostly guaranteed. Yet, there are factors you must consider –

• Interest rates: The interest rates offered on different term period varies from bank to bank. The interest rates generally range between 3.5 per cent to 8.5 per cent per annum. These could vary depending on the tenure of the deposit selected. For mid-term deposits, the rates are typically higher. For long-term deposits, the prices are lower.

• Term period: The term periods are divided into three categories –

• Short-term: Between six months to a year
• Mid-term: Between a year to five years
• Long-term: Lasts between five years to 10 years
  
  

Premature withdrawal: Those who open an RD account receive the facility of early withdrawal with it. The interest payable gets calculated depending on how much of tenure is complete. Penalties do get levied. Therefore, choose a bank that offers higher interest rates and charges lower penalties.

Sponsor Ads

• Ad Space Available - Rent it Now!

Report this Page

Created on Jun 2nd 2020 07:12. Viewed 228 times.

Share on APSense

Comments