Urban Money

Recurring Deposit

If you want to save some money overtime in small instalments, you can easily use a recurring deposit account. A recurring deposit account comes with flexible term options and helps you grow your savings with interest equivalent to any FD account. With minimal documentation, you can open an RD account for as less as six months tenure. This deposit account, therefore, comes handy to achieve both short-term and long-term goals.

Recurring Deposit - An Overview

Recurring Deposit or RD is a financial investment tool offered by Indian banks and NBFCs to individuals who wish to invest a small amount of money every month for an agreed term. It is a unique term deposit that offers flexibility and decent compounded returns over time. The maturity of recurring deposits can range from anywhere between 6 months to 10 years.

What is a Recurring Deposit Account?

A Recurring Deposit account can be maintained in any bank offering the respective services. Generally, the customers have the flexibility to invest any amount depending on the minimum deposit requirements which differ from bank to bank. The interest returns on RDs are based on the policies of the financial institutions. This is a great savings opportunity for individuals with regular incomes.

It is indeed always in the best interest of everyone themselves and for their loved ones to develop an interest in financial management. Opening a Recurring Deposit Account is a great way to building secure financial aid for exigencies in life.

Important Facets of a Recurring Deposit Account

There are many strategic benefits of opening a Recurring Deposit Account. Firstly, an RD account lets individuals invest a recurring amount they are comfortable with. Moreover, the investment assures interest payments which are compounded quarterly as well. Additionally, the rate of interest generally is similar to that of a Fixed Deposit plan which means that individuals can enjoy higher returns than their savings capital.

Although subjective to financial institutions, it is possible to break the Recurring Deposit Account and withdraw money. 

Other than that, one can seek loans with Recurring Deposits as collateral. Applicants can get as much as 80% of the decided RD revenue as the loan amount. Finally, for ease, individuals can instruct banks to make recurring investments automatically from their accounts through the standing instruction tool.

Takeaways 

A Recurring Deposit Plan contains:

  • The flexibility of deciding the investment amount and monthly payment
  • Interest returns similar to FDs 
  • 6 months to 10 years of maturity period
  • Collateral benefits for loan sanctions
  • Premature withdrawals

Who is Eligible for Opening a Recurring Deposit Account?

Before delving into the idea of an RD Account, one should keep in mind its general nature. An RD interest rate usually varies across banks within the range of 3%-6%. Other than that, deciding the maturity period holds great importance with regards to returns. For example, it is considered that the mid-term duration of maturity periods gives maximum returns as compared to short or long-term duration maturity periods.

Any individual, startup, company, proprietor or organization can invest in a recurring deposit account. In the case of minors, there needs to be proof of name for children above 10 and parental or guardian supervision for children below 10.

Key Documentations to Open an RD Account

  • Interest forms are provided by every bank offering the RD service. Applicant needs to fill them out with any mistakes
  • Passport size photos
  • Any proof of identity
  • Any proof of residence
  • KYC documents

Recurring Deposit Calculator

Recurring Deposits are a great tool to put away some fixed money to accrue interest every month for an agreed term.

  • With the latest Urban Money Recurring Deposit Calculator, one can easily bypass the tedious task of calculation and analysis.
  • Moreover, the calculator provides the total accrued investment post maturity.
  • The Urban Money RD Calculator is user friendly and efficient. By adding few inputs, a user can avail steadfast results.

Recurring Deposit Formula

Used by most banks, the formula for RD calculation is generic. It consists of three variables that act as inputs for the Urban Money RD Calculator. The components of the calculator include:

  • Investment Amount, which can be denoted with ‘P’
  • Rate of Interest, which can be denoted with ‘R’ 
  • Maturity Period, which can be denoted with ‘T’
  • Due to the compounding nature of interest rate, we can add ‘N’ for the number of times rates of interest compounds.

The formula is as follows: A = P (1 + R/N) ^ NT

Where ‘A’ would be the denotation for the final amount receivable.

Frequently Asked Questions (FAQs)

Ques: Can I Break My RD Account Before Completion Of Tenure?

Ans: Yes, the RD account can be closed before the completion of the maturity period. The only thing to be noted is that, depending on the lender, there could be variations in policies regarding the closure.

Ques: Where To Open Recurring Deposit Account?

Ans: RD Account can be opened either online or offline. For Online registration, one has to visit the website of the respective banks. For offline registration, the applicant has to visit their respective bank branch. RD Account can also be opened via Post office, for which, individuals have to visit the nearest post office branch.

Ques: What Is The Minimum & Maximum Deposit Amount To Open An Rd Account?

Ans: Even though there is no upper limit to the deposit amount, one has to make sure that they invest at least INR 100 for public sector banks and 500 INR for private banks or NBFCs.