Offered by post offices and various other public and private financial institutions, a recurring deposit (RD) is a type of term deposit where you can invest a fixed amount every month over a predetermined period.
Unlike market-linked securities, RD is a low-risk investment avenue, ensuring a guaranteed return of the entire invested amount along with the interest upon the completion of the tenure. Before we dive into more details, let us first understand the key features of an RD account.
Features of Recurring Deposit
A recurring deposit allows an individual to earn fixed interest on their invested amount at frequent intervals until the maturity period. Keep reading to find out some other key features of a recurring deposit account.
- There is no limit to the number of RD accounts an individual can open.
- Recurring deposit schemes come with high interest rates ranging from 2.50% to 7.00%.
- Senior citizens get an additional 0.50% interest over the standard rates offered to regular citizens.
- Minors can also choose to open an RD account under the supervision of their parents or legal guardians.
- One can open an RD account with a minimum amount of ₹100 per month.
- You can make advanced deposits at your convenience.
- A recurring deposit generally comes with a lock-in period ranging from 30 days to 3 months.
- You will get a flexible tenure option ranging from 6 months to 10 years.
- Mostly, the interest upon your invested amount is compounded at an interval of every quarter.
- In case of any unforeseen emergency, one can opt for premature account closure. However, premature closure of an RD account is subject to a penalty.
- You can opt for loans/overdrafts against RD facilities.
- You cannot opt for partial withdrawal of your RD accounts.
Types of Recurring Deposit
Read below to discover 4 different types of recurring deposit accounts offered by post offices and other banking institutions.
- Regular Recurring Deposit Account: An Indian resident of 18 years and above can apply for this type of RD account.
- Recurring Deposit Account for Senior Citizens: An Indian resident aged above 60 years is eligible to open this type of RD account. Additionally, they get preferential recurring deposit interest rates compared to regular recurring deposit account holders.
- NRO or NRE Recurring Deposit Account: Only NRIs (non-resident Indians) can apply for this type of RD account. They can open NRE and NRO RD accounts to earn high interest rates on their foreign savings.
- Recurring Deposit Account for Minor: This type of RD account is meant for Indian residents aged below 18 years (minors). Although, such accounts are fully supervised by the minor’s legal guardian or parent.
How to Open a Recurring Deposit Account Online?
Below you will get a detailed step-by-step guideline on how one can open a recurring deposit account online.
Step 1: Open the mobile or net banking portal of your respective bank.
Step 2: Enter your user ID and password to log in.
Step 3: Surf through the dashboard and click on the ‘Open RD account’ option.
Step 4: Provide a few necessary details like the RD term, monthly instalment amount, and the bank account number (from where you want your amount to be debited every month).
Step 5: State the nominee’s details.
Step 6: After carefully reading all the terms and conditions, click on the checkbox followed by submitting the application.
Afterwards, you will get a confirmation message along with the RD receipt on your registered mail ID.
How to Open a Recurring Deposit Account Offline?
Other than opening an RD account online, you can opt for the offline mode. Kindly refer to the below-listed steps to know how you can do so.
Step 1: Visit your nearest post office or bank branch.
Step 2: Ask for an RD application from the bank officials and fill it up.
Step 3: Provide necessary details like instalment amount, nominee, RD term, mode of payment, etc.
Step 4: Make your first instalment with a cheque or cash.
Afterwards, the bank officials will open your RD account within a predetermined time.
How to Use an RD Calculator?
RD Calculator Online are easy to use and provide outputs within a few seconds. Kindly go through the below-stated steps for how you can easily use a recurring deposit calculator online.
Step 1: Enter ‘RD Calculator’ on the search bar.
Step 2: After opening any of the RD calculators, enter the monthly deposit amount.
Step 3: Enter the interest rate given by your respective bank.
Step 4: Use the slider or enter the RD term.
The Bottom Line
An RD scheme is not subject to market volatility, making it a preferred choice for several individuals over other investment avenues. Regardless of its popularity, you must consider a few factors such as the tenure of an RD account, rate of interest offered by the bank or post office, withdrawal facilities, and minimum deposit amount before applying for a recurring deposit account.
