Recurring deposit ( RD ) is a popular investment, with low risk. Among low-risk investment tools with moderate and assured returns. Flexible investment for all types of people. In this article, We will see what is a recurring deposit, Its types, the Benefits of investing in RD, How to open an RD account, and more think about RD.
Contents in this article
What is a Recurring Deposit (RD)?
Recurring Deposit is a type of account. RD provides customers with the flexibility to invest an amount of their choice each month and save money with ease. A recurring deposit account is provided by almost all banks.
RD account most popular investment in India. I also recommend you to invest in it if you can’t take a risk on the capital you have or you can take the risk then you can invest in the stock market.
You can open in almost all banks and NBFCs in India. You should invest for a minimum of 6 months and a maximum of 10 years. After 10 years you can renew or raise a different or new RD account. The interest rate usually ranges from 5% to 7.60%.
Advantages and Disadvantages of Investing in Recurring Deposit (RD) account
Below are some benefits and disadvantages of investing of RD account. It also means pros and cons of RD.
Benefits or Advantages of investing in RD account.
Guaranteed return on investment
The investors get a fixed return on investment. So, It means a guaranteed return on invested capital investors will get after the maturity period. Unlike equity and mutual funds, recurring deposits offer guaranteed returns on the principal amount invested in the short term.
No risk of investment
The recurring deposit (RD) is provided by the almost all banks and as we all know the banks are opened after the government permission. So, Their is no risk on investment.
Flexible recurring deposit
Another benefit of investing money in the recurring deposit account is Flexibility. A flexible RD is a scheme in which an investor can invest any amount of money (higher than the minimum) at any interval of time. Some banks also allow the facility for the depositor to skip an installment without paying any fines.
Anytime withdrawal
RD accounts also offer the facility to withdraw money anytime. The bank may charge a small fee for it but it is still a good option for the depositor to have in case the investor needs the deposited funds along with the return on it urgently.
Disadvantages of investing in recurring deposit (RD)
Liquidity
When you deposit the money in an RD, you will never have the right to withdraw any part of the money until the term of the deposit is over.
Hence, if you are looking for an easy liquidity instrument, RDs are a bad idea. On the other hand, if you want to control your savings this disadvantage may work to your benefit.
Rate of interest on investment
The rate of interest which is provided by the banks is not very good. It’s has a normal return on investment. The interest rate that you earn on recurring deposits (RD) is much lower than regular fixed deposit schemes.
How to open a recurring deposit account
First, decide that you are really want to invest in RD or not. If you are really want to start investing in it then you can follow the below steps to open a recurring deposit account.
Almost all private and commercial bank provides to open an RD account. In India, post offices also provide to open an RD account with the name of Post office Recurring Deposit scheme. Follow the below steps to open an RD account.
- If you have already a bank account then you can proceed with other steps and If you do not have any bank account then first open it. For opening an RD account you will need a bank account.
- If you already have an account with the bank that you wish to open a Recurring Deposit with, you can contact the nearest bank branch or the bank’s customer service cell to open a recurring deposit account.
- If you wish to open a recurring deposit account in a bank with whom you do not have an account, you will have to contact the nearest branch and submit an application form. Also, you will have to submit KYC documents to open an account.
- At the time of opening an RD account, the tenure, as well as the monthly due amount (deposit amount), should be decided. Monthly payments for RD can be done online using ECS, online banking, or fund transfer.
How can I break the recurring deposit account
Many people have personally asked me how to break RD account. Before maturity and after maturity. Let’s see, the process of withdraw RD.
Before maturity period
Sorry, currently a Recurring Deposit cannot be withdrawn partially. To get the full advantage of your RD, it’s always more beneficial to recognize it to complete the term. But if you wish too, you can withdraw it early by following few simple steps:
1. On Mobile Banking
- Go to Banking
- Select Recurring Deposits
- Select Premature withdrawal
OR
2. On Net Banking
- Go to Banking -> Deposits
- Select Premature Withdrawal of Deposit
(Amount will be credited to your bank account instantly).
3. Alternatively, you can also place a request at the Bank. (Amount will credited to your bank account within 24-48 hours).
Important Note:
1) In case of early closure of Recurring Deposit (RD) within a month, no interest shall be paid and only the capital amount which was invested in it will be returned.
2) On early withdrawal of RD. The interest will be paid at the rate prevailing on the date of deposit for the tenure the deposit remained with the bank or at the promised rate, whichever is lower post subtracting as a penal charge of 0.5% on early withdrawal of RD.
After maturity of RD
I personally recommend you to withdraw your Recurring deposit (RD) after the maturity period only. Withdraw premature RD If and only if any necessary work has to do. follow the below steps to break your RD.
In generally, Banks credit the invested amount with interest according to agreement to your bank account in 24 – 48 hours.
If they done last from the given time of period then you should visit the bank and request them to credit amount to your account.
Last word from mini invest
I hope you have understood every thing about Recurring deposit account (RD). If you have any recommendations and feedback then you can leave it in the comment box below.