Savings is a seven-letter word that gives sleepless nights to many. From a middle-class man to a millionaire, irrespective of one’s financial status, everyone strives to build their savings. While some manage to save successfully, many fail miserably at the art of saving.
To ease the process of building savings, banks offer Recurring Deposits (RDs) that help people plan a better future. A Recurring Deposit is a term deposit where one can earn interest by investing a fixed amount of money at regular intervals for a predetermined amount of time. At the end of the term or maturity of the RD, the investor gets back the principal amount along with the interest earned on it.
Most banks offer Recurring Deposits at interest rates as high as Fixed Deposits. But the rate of interest on a Recurring Deposit differs according to the length of the predetermined term. Banks compound the interest on a quarterly basis so that the earned interest that is added to the principal amount also earns interest in the next quarter and so on. The minimum duration of a Recurring Deposit is 6 months, post which, the term could be extended by multiples of three months up to a maximum of 10 years.
Any citizen of India and HUF (Hindu Undivided Families) can choose to invest in a Recurring Deposit. Even minors and senior citizens can enjoy the benefits of an RD. One of the key features of RDs is that one cannot withdraw until the maturity of the deposit. However, banks allow the account holders to close the Recurring Deposit after deducting penalty charges. If an RD is closed, the investor will get the principal amount along with the interest earned from start of the term till the period of closure. If you are closing the RD with a bank and reinvesting the money in another term deposit with the same bank for a period greater than the remaining term of RD, then the bank might not deduct penalty charges.
In cases of monetary emergencies, instead of breaking the RD, you can take a loan against the Recurring Deposit. Banks offer loans up to 90% of the amount accumulated in a Recurring Deposit. Though TDS is not applicable on RD, the interest earned from RDs is taxable.
Here are a few benefits of Recurring Deposits:
- RDs instil the habit of savings among the masses.
- Unlike a Fixed Deposit, you don’t need a huge amount to open a Recurring Deposit. You can open an RD with a minimum amount of as little as Rs.10.
- Since premature withdrawal is not allowed, a Recurring Deposit is better suited to build savings rather than the regular savings account.
- During financial emergencies, you can avail up to 90% against the amount available in an RD.
- The interest earned through RDs is greater than any savings scheme, as banks offer RDs at interest rates as high as that of a Fixed Deposit.
Check out the top 10 RDs in India in 2016:
| Bank Name | RD Interest Rate | Senior Citizen RD Rate |
| DHFL Bank | 9.00% to 9.00% | 9.00% to 9.00% |
| Post Office | 8.40% | 8.40% |
| Tamilnad Mercantile Bank | 7.95% to 8.10% | 8.45% to 8.60% |
| Axis Bank | 7.50% to 7.90% | 8.00% to 8.40% |
| Bharatiya Mahila Bank | 7.50% to 7.90% | 8.00% to 8.40% |
| Corporation Bank | 7.50% to 8.75% | 8.00% to 9.25% |
| Deutsche Bank | 6.25% to 8.50% | 6.25% to 8.50% |
| IDBI Bank | 7.50% to 7.75% | 8.00% to 8.25% |
| IndusInd Bank | 7.50% to 8.00% | 8.00% to 8.50% |
| Lakshmi Vilas Bank | 7.80% to 7.90% | 7.80% to 7.90% |
Now that we have got you all excited about Recurring Deposits, compare rates and start saving right away!