If you are looking at options to save and invest some portion of hard-earned money every month but want fixed and secured returns, a bank Recurring Deposit (RD) is a worthwhile avenue.
What is Recurring Deposit?
Among the low-risk investment tools with moderate and assured returns, Recurring Deposit (RD) is a popular investment option in India. It comes with an option of flexibility for customers in the choice of investment amount and tenure accompanied by multiple other benefits.
Available in flexible tenure options ranging from 6 months to 10 years, this investment tool offered by multiple banks and NBFCs helps channelize monthly savings for long or short-term corpus creation.
Investors can thus choose a minimum amount to be invested every month over the term for assured wealth generation.
A bank RD too you can create wealth, provided you do the following:
- Open an RD account when the interest rates are high
- Invest regularly and do not delay depositing your installment sum (be disciplined)
- Select the amount and the tenure of your bank RD thoughtfully
- Do not stop investing in the RD account and prematurely close it
- Keep renewing your RD or at the end of the tenure make a fixed deposit of the maturity proceeds
Features of Recurring Deposit
- Period of deposit Minimum – 12 months,Maximum – 120 months
- Available at all branches
- Minimum deposit amount is Rs. 100/- per month (thereafter in multiples of Rs. 10/-)
- Maximum Deposit Amount : No Limit
- Penalty charges for non-Deposit of monthly Installments:
- For a/c with maturity period 5 years and less Rs. 1.50 per Rs. 100/- per month
- For a/c with maturity period above 5 years- Rs. 2.00 per Rs. 100/- per month.
- A service charge of Rs. 10/- will be levied on Recurring Deposit accounts paid out on or after the date of maturity, wherein there is default in payment of three or more consecutive installments and the account has not been regularized.
- In case six consecutive installments are not received, the account shall prematurely be closed and balance paid to the account holder.
- Instructions for disposal of maturity proceeds are accepted at the time of opening of accounts.
- Nomination : Available
- Universal Passbook will be issued.
- Loans/OD up to 90% of deposited amount available
- Transfer-ability among our Branches : Allowed
- Rate of Interest as applicable to Term Deposits
- The interest rate payable to SBI Staff and SBI pensioners will be 1.00% above the applicable rate.
- The rate applicable to all Senior Citizens of age 60 years and above will be 0.50% above the applicable rate.
Types of Recurring Deposits
- RD for senior citizens :
- Carrying the same features as a regular RD, the scheme for senior citizens brings higher interest rates than the regular accounts. The interest is compounded quarterly as per the applicable interest rate, thus helping senior citizens withdraw a higher maturity amount and meet their short-term funding needs efficiently in the absence of a regular income.
- Generally, the additional interest rates offered by various banks on senior citizen RD scheme range between 0.25% and 0.75% above the regular deposit rates.
- Flexi RD : Flexi RD deposit schemes allow an individual to invest a flexible amount as per his/her convenience. While the core investment amount is pre-decided in this type of deposit, the account holder has an option to deposit amounts in multiples of the core amount.
- Several banks offer flexible RD schemes with the varying tenure as well as conditions.
- RD for NRI/NRE :
RD schemes are one of the best investment options for NRIs (Non-Resident Indians). Substantial returns through an investment can generated with a small recurring investment amount per month. As an NRI, one can invest in RDs either through an NRE or NRO RD account.- Through NRO accounts: NROs are non-resident ordinary accounts where the investment is repatriable provided the account holder fulfils the requisites. Also, the investment in these accounts can come only from an NRE or NRO account. Interest earned through these accounts is taxable at 30% slab and also attracts additional CESS.
- Through NRE accounts: Investment or deposit to these accounts is allowed only through an NRE account. NRE represents a non-resident external account and income earned through it is not taxable in India. Also, the facility of hassle-free account transfer to the investor’s home country is available for this account.