Recurring Deposits (RD) provides customers with the flexibility to invest an amount of their choice each month and save money with ease. Recurring deposit accounts are offered by most of the banks and NBFCs in India with tenures ranging from 6 months to 10 years. The interest rate usually ranges from 5.00% - 7.85%.
RD offers you a fixed interest on the invested amount at a specific frequency till the pre-determined term or up on maturity. At the end of the term, the amount upon maturity(which is your invested capital) along with remaining or accumulated interest is paid.
Recurring Deposit schemes aim to inculcate a regular habit of saving among the public. Minimum amount that can be deposited varies from bank to bank. It can be an amount as small as Rs.10. The minimum period of deposit starts at six months and the maximum period of deposit is ten years. The rate of interest is equal to that offered for a Fixed Deposit and is hence higher than any other Savings scheme. Premature and mid term withdrawals are not allowed. However, the bank may allow to close the account before the maturity period, sometimes with a penalty for premature withdrawal. RD offers the additional benefit of taking loan against the deposit, i.e., by using the deposit as a collateral. About 80 to 90% of the deposit value can be given as loan to the account holder. The Recurring Deposit can be funded periodically through Standing Instructions which are the instructions given by the customer to the bank to credit the Recurring Deposit account every month from his/her Savings or Current account.