Recurring Deposit
Small Deposit through Recurring Deposit in Bank can get you assured returns with any Market risk.
Recurring Deposit [RD] is one of the Unique Term Deposit offered by banks to its customers, making customers regularly invest as small amount form their incomes to deposit a fixed amount from their earning every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits.
In case of money withdrawn from the RD in the bank account before maturity?
Normally banks don’t allow premature and mid-term withdrawals in RD’s.
Customers need to pay penalty for closing the RD account before the maturity period is completed, for premature withdrawal of the RD, the amount differs from bank to bank.
Difference between Recurring Deposit and Fixed Deposit:
- RD allows customers to make regular deposits and earn decent returns on their investment after the maturity period but in FD the deposit is made using the lump sum amount.
- In RD the interest on the amount is mostly compounded quarterly but in FD the interest amount can be paid quarterly, half-yearly, annually or on maturity.
Why Invest in RD?
Few features of Recurring Deposit account:
- Basically, FDs are rigid, not ideal for short terms the same as investing in mutual funds for long-term to get high returns and Recurring Deposit is an ideal investment cum savings option for the customer.
- There are no such minimum age limits to open RD account even the Minors can open RD account but under the guardianship of their parents.
- Senior citizens usually get 0.5% more interest rate compared to other investors.
- The monthly saving amount can be as low as 500rs per month.
Almost all the banks in India offers Recurring Deposit Account with a term as per their needs.
RD’s and FD’s have fixed interest rate fixed by the bank while starting the deposit account and cannot be changed during the tenure, unlike mutual funds whose amount changes with markets movement like Equity funds, Balanced funds, etc.
On maturity of RD’s, the individual will be paid a lumpsum amount which including regular, periodic investments and the interest earned on them.
Best rates: Recurring Deposit interest rate Comparison, Mar 2020 (Source: Myloancare):
| Bank | Interest Rates | Senior Citizen Rates |
| SBI Recurring Deposit | 6.10% – 6.10% | 6.60% – 6.60% |
| HDFC Bank Recurring Deposit | 5.40% – 6.40% | 5.90% – 6.90% |
| ICICI Bank Recurring Deposit | 6.25% – 7.50% | 6.75% – 8.00% |
| Axis Bank | 7.00% – 7.60% | 7.35% – 8.25% |
| Kotak Bank | 6.50% – 7.30% | 7.00% – 7.80% |
| IDFC First Bank | 6.75% – 7.25% | 7.25% – 7.75% |
| Bank of Baroda | 5.50% – 6.40% | 6.00% – 6.90% |
| Citibank | 6.00% – 7.50% | 6.50% – 8.00% |
| IDBI Bank | 6.00% – 7.05% | 6.50% – 7.55% |
| Indian Bank | 6.00% – 6.75% | 6.50% – 7.25% |
| PNB | 6.25% – 6.75% | 6.75% – 7.25% |
| Allahabad Bank | 6.50% – 6.75% | |
| Andhra Bank | 6.26% – 6.80% | 6.76% – 7.30% |
| Bank of India | 6.25% – 6.70% | 6.75% – 7.20% |
| Bank of Maharashtra | 6.00% – 6.60% | 6.50% – 7.10% |
| Canara Bank | 6.20% – 7.00% | 6.70% – 7.50% |
| Central Bank of India | 6.20% – 7.00% | 6.70% – 7.50% |
| Punjab and Sind Bank | 6.25% – 7.00% | 6.75% – 7.50% |
| UCO Bank | 6.70% – 6.75% | |
| Union Bank of India | 6.50% – 6.85% | 7.00% – 7.35% |
| DBS Bank | 5.75% – 7.50% | 5.75% – 7.50% |
| Bandhan Bank | 6.40% – 7.55% | 7.15% – 8.30% |
| Jana Small Finance Bank | 6.75% – 8.50% | 7.35% – 9.10% |
| AU Small Finance Bank | 6.00% – 7.77% | 6.50% – 8.27% |
| Fincare Small Finance Bank | 7.00% – 9.00% | 7.50% – 9.50% |
| ESAF Small Finance Bank | 6.00% – 8.00% | 6.50% – 8.50% |
| Equitas Small Finance Bank | 7.00% – 8.00% | 7.60% – 8.60% |
| Ujjivan Small Finance Bank | 6.50% – 8.00% | 7.00% – 8.50% |
| Lakshmi Vilas Bank | 6.50% – 8.00% | 7.00% – 8.60% |
| South Indian Bank | 6.50% – 7.60% | 7.00% – 8.10% |
| Syndicate Bank | 6.50% – 6.80% | 7.00% – 7.30% |
| Corporation Bank | 6.50% – 6.80% | 7.00% – 7.30% |
| DHFL | 8.00% – 8.00% | 8.40% – 8.40% |
| Yes Bank | 7.00% – 7.25% | 7.50% – 7.75% |
| RBL Bank | 7.15% – 8.05% | 7.65% – 8.55% |
| Karur Vysya Bank | 6.75% – 7.00% | 6.75% – 7.50% |
| IndusInd Bank | 7.25% – 8.00% | 7.75% – 8.50% |
Recurring deposit calculation formula online:
M = R[(1+i)^n-1]/(1-(1+i)^(-1/3) )
Where,
M = Maturity Value
R = Monthly Installment
n = Number of quarters
I = Rate of interest/400
E.g.: Let’s say you deposit Rs. 5,000 per month for a year with the interest rate of 9.00% on Recurring despot account.
i = 9.00/400
n= compounding frequency (since it is quarterly, it will be 4)
M: ₹ 62,984 with the interest earned of ₹ 2,984.
Read more at knowandask:
Grow Your Spare Money In Account by investing Bank FD [Fixed Deposit].
