A Recurring Deposit (RD) is a term deposit provided by banks that enable people who have regular incomes to deposit fixed amount on monthly basis into their recurring deposit account and gain interest at the rate applicable to fixed deposits. It provides flexibility to investors to invest an amount of their choice each month. In simple terms, it is a series of Fixed deposits.
The vital characteristics of RD are:
RDs are also available in other types that suit varied investors:
This scheme bears similar features as a regular RD and brings higher interest rates than the regular accounts. In this scheme, the interest is compounded quarterly, thus enabling the senior citizens to withdraw higher maturity amounts and efficiency meet their short-term funding needs in the absence of regular incomes. The additional interest rates in the RD scheme range between 0.25% and 0.75%, which is above the regular deposit rates.
For NRIs, RD schemes are one of the best investment options for gaining substantial returns through investments that are done monthly. As an NRI, you can invest in RDs through an NRE or NRO RD account.
This scheme allows the individual to invest a flexible amount as per its convenience. Since the core investment amount is pre-decided, account holders have the option to deposit amounts in multiples of the core amount.
As an example, if the core deposit amount is Rs. 1,000, the investor can choose to deposit in its multiples, like Rs. 2,000, Rs. 3,000, etc. Since there's flexibility on how to do the investment, the interest on the amount is determined at a stable rate. Interest computation on the core multiples is done based on investment duration. Various banks provide flexible RD schemes with varying tenure.