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In case of money withdrawn from the RD in the bank account before maturity?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.

Recurring Deposit, Fixed Deposit, Funds knowandask

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):
BankInterest RatesSenior Citizen Rates
SBI Recurring Deposit6.10% – 6.10%6.60% – 6.60%
HDFC Bank Recurring Deposit5.40% – 6.40%5.90% – 6.90%
ICICI Bank Recurring Deposit6.25% – 7.50%6.75% – 8.00%
Axis Bank7.00% – 7.60%7.35% – 8.25%
Kotak Bank6.50% – 7.30%7.00% – 7.80%
IDFC First Bank6.75% – 7.25%7.25% – 7.75%
Bank of Baroda5.50% – 6.40%6.00% – 6.90%
Citibank6.00% – 7.50%6.50% – 8.00%
IDBI Bank6.00% – 7.05%6.50% – 7.55%
Indian Bank6.00% – 6.75%6.50% – 7.25%
PNB6.25% – 6.75%6.75% – 7.25%
Allahabad Bank6.50% – 6.75%
Andhra Bank6.26% – 6.80%6.76% – 7.30%
Bank of India6.25% – 6.70%6.75% – 7.20%
Bank of Maharashtra6.00% – 6.60%6.50% – 7.10%
Canara Bank6.20% – 7.00%6.70% – 7.50%
Central Bank of India6.20% – 7.00%6.70% – 7.50%
Punjab and Sind Bank6.25% – 7.00%6.75% – 7.50%
UCO Bank6.70% – 6.75%
Union Bank of India6.50% – 6.85%7.00% – 7.35%
DBS Bank5.75% – 7.50%5.75% – 7.50%
Bandhan Bank6.40% – 7.55%7.15% – 8.30%
Jana Small Finance Bank6.75% – 8.50%7.35% – 9.10%
AU Small Finance Bank6.00% – 7.77%6.50% – 8.27%
Fincare Small Finance Bank7.00% – 9.00%7.50% – 9.50%
ESAF Small Finance Bank6.00% – 8.00%6.50% – 8.50%
Equitas Small Finance Bank7.00% – 8.00%7.60% – 8.60%
Ujjivan Small Finance Bank6.50% – 8.00%7.00% – 8.50%
Lakshmi Vilas Bank6.50% – 8.00%7.00% – 8.60%
South Indian Bank6.50% – 7.60%7.00% – 8.10%
Syndicate Bank6.50% – 6.80%7.00% – 7.30%
Corporation Bank6.50% – 6.80%7.00% – 7.30%
DHFL8.00% – 8.00%8.40% – 8.40%
Yes Bank7.00% – 7.25%7.50% – 7.75%
RBL Bank7.15% – 8.05%7.65% – 8.55%
Karur Vysya Bank6.75% – 7.00%6.75% – 7.50%
IndusInd Bank7.25% – 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].

Mutual Fund best way to save money.

Amit Singh Rawat_Knowandask

Amit Singh Rawat: Owner/ Founder of Knowandask a Digital Learning platform to educate yourself learn spread knowledge and share knowledge.

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