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Recurring Deposit - Overview

Recurring Deposit - Overview

A recurring deposit, or an RD, is a deposit made by a customer in a bank, which allows the customer to earn returns on their regular deposits.

  • In its most basic form, an RD consists of a regularised deposit along with an interest rate.

  • The reason why a recurring deposit enjoys a significant amount of popularity is that it offers people a great deal of financial flexibility.

  • All an investor has to do is invest a particular amount each month, and the recurring deposit will earn interest on that amount.

  • Another benefit of a recurring deposit is that unlike a fixed deposit, an RD is a less rigid investment, and is ideal for short-term investment.

  • As soon as the deposit begins, the interest rate is fixed, and that same rate applies for the tenure of the deposit.

  • At the time of maturity of the RD, the investor receives a lump sum of the initial amount invested, along with interest earned.

Owing to its short-term nature, a recurring deposit is a widely popular option for investment, especially for those looking to save their money, and earn returns on their money.

 

A few key features of a recurring deposit include :

  1. They encourage saving since the tenure of the deposit can be short;

  2. The minimum amount that can be deposited by a customer is different for each bank hence offering more options to customers;

  3. The rate of a recurring deposit is equal to that of a fixed deposit, making it an excellent saving instrument;

  4. You can choose to give your bank standing instructions, and the monthly amount of your recurring deposit will be deducted automatically from your assigned savings or current account;

  5. The instalments could be in the multiples of INR 100 or as little as INR 1,000. There is no upper cap on the maximum monthly instalment for RD account, and you can calculate the same as per your financial goals, time horizon inflation, target amount and prevailing interest rate.

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