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Fixed Deposit VS Recurring Deposit|What is the difference between Fixed Deposit (FD) and Recurring Deposit (RD)|YES BANK

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Fixed Deposit (FD) and Recurring Deposit (RD) are sub-types of a term deposit. An account holder can open a term deposit to keep his/ her money safe and earn interest on it. There are two types of Term Deposits: Fixed Deposits and Recurring Deposits. And they are among the most preferred investment options in India. FDs and RDs offer similar benefits within a fixed period. But they differ in the value and manner in which the account holder earns monetary benefit.

Features of Fixed Deposit

Lump sum deposit - You can open a fixed deposit only by depositing a lump sum amount. You have to deposit this amount for a fixed tenure (time). The minimum tenure is for 7 days, and the maximum can go up to 10 years. The account holder/ nominee can fix the tenure.

Monthly/ Quarterly Pay-out - The minimum investment amount for an FD is ₹10000. But this rate is subject to change by the concerned bank/ financial institution. Account-holders get a fixed interest on the principal amount invested by them every month or quarter, depending on the terms of pay-out.

Auto renewability - FDs are auto-renewable. Which means your account remains secure in times of inactivity. Moreover, at the end of the tenure, you have the option of renewing the principal/ principal + interest earned and in turn, earn further interest.

Features of Recurring Deposit

Monthly deposit - A recurring deposit requires the payment of a fixed amount per month for a fixed tenure period. There is no option of depositing a lump sum amount. The minimum tenure period for an RD is 6 months, and the maximum tenure period can go up to 10 years. The account holder/ nominee can fix the tenure period.

Maturity Pay-out - The minimum investment amount for an RD is 1000. But this rate is subject to change by the concerned bank/ financial institution. Account-holders get a fixed interest on the principal amount invested along with the principal amount only on maturity, i.e. the completion of the tenure fixed by them.  

Penalty for default – Although your account remains secure in times of inactivity, RDs are not auto-renewable. Moreover, if there is a delay in making the monthly payment, you become liable to pay a penalty amount for default. This amount, though nominal (at the rate of ₹1 for ₹100) can lead to a permanent closure of the RD account by the concerned bank/ financial institution. The penalty is also applicable in the case of a Fixed Deposit.

Apply for Fixed Deposit/ Recurring Deposit with YES Bank

You can easily open an FD/RD with YES Bank, either on a sole basis or in conjunction with a nominee/ co-accountholder. YES BANK offers competitive interest rates, provides greater returns, and assures maximum security of your savings.

 

Key offerings for FDs include:

  • High-interest rates

  • Higher interest rates for senior citizens

  • Auto-renewable option available

  • Five years of tax-saving (subject to the prescribed limits by Income Tax Act, 1961)

  • Compound interest on reinvestment of principal amount + interest earned

 

Key offerings for RDs include:

  • High-interest rates

  • Higher interest rates for senior citizens

  • Monthly instalment amount as little as ₹1000

  • Encourages habit of regular saving

 

Both FD/ RD give you a guaranteed return on your principal amount and are safe investment options.  FDs are more suitable for those who have a lump sum amount to invest and are looking for monthly/ quarterly cash flow. RDs are suited for those who prefer to pay nominal monthly amounts and are fine with a long-term maturity pay-out.

 

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