Recurring Deposits: Should you Open an RD Account?

A recurring deposit scheme of banks and post offices that lets you save money at regular intervals of time, mostly monthly saving plans. 

It is quite a useful scheme for those who would like to secure monthly savings. 

What is a recurring deposit account? 

RD account

Banks provide a facility for recurring deposit accounts for those who want monthly savings plans. 

It can be opened by any individual, including minors. 

One of its best facilities is that a recurring deposit account can be opened by an individual who is in a low-income group. 

A recurring deposit minimum amount is just ₹ 100 per month, which is suitable for them. 

It means a person can have these accounts with a minimum monthly subscription of just ₹100, which is very suitable for daily wage earners. 

Features of Recurring Deposit Account

RD features

You may find most banks have a recurring deposit scheme with similar features.

Below are some of the features of an RD that you should know to get the maximum benefits of the scheme.

  • A monthly secured recurring deposit plan for everyone. 
  • The interest rate is the same as the fixed deposit rate. 
  • A loan is available against the RD with an eligible amount of 90% of the face value. 
  • A minimum subscription amount of just ₹ 100 per month. 
  • There is no maximum subscription limit. 
  • A recurring deposit tenure is 1 year to 10 years. 
  • Options are available for interest payouts. 
  • Premature closure of the account is allowed. 
  • An account passbook is available. 

Benefits of a recurring deposit

RD benefits

There are a number of benefits to having a recurring deposit account.

With it’s availability to everyone at the lowest subscription cost, though it does not generate a high return, RD is still one of the safest and best choices of the common people.

Some of the benefits of an RD account
A recurring deposit account is without any risks. As the subscription amount is as low as ₹100, people of the low-income group can invest in RD. 
A loan is available against the RD account. The eligible amount is up to 90% of the face value of RD. 
A recurring deposit account can be maintained by any individual, including a minor. 
There is no maximum subscription amount; a person who does not want to take risks might enjoy the facility of RD. 

Drawbacks of a Recurring Deposit Account

RD drawbacks

Likewise, as with any other bank account, a recurring deposit has it’s own flaws.

Though the scheme is quite useful to every customer, you may find these shortcomings in having an RD account.

Some of the drawbacks of an RD account
Interest earned is taxable as TDS. 
The tax deduction rate is 10% and 20% if the subscriber has no PAN card. 
A recurring deposit has a low-interest rate. If the same amount is invested in a mutual fund SIP with a little risk, better returns may get. 
If you fail to pay monthly instalments, there will be penalties for that. 

Recurring Deposit Types and Plans

RD plans

When we say recurring deposit plans, there are a few of them. We have seen consumers of different ages.

From a minor to an adult and to a senior citizens.

  • RD for the minor has to open with the Guardian. 
  • Normal RD account for an individual. 
  • For senior citizens, recurring deposits have higher interest rates as applicable to them. 

Apart from the above plans, the tenure of the RD makes the difference. It is seen that an RD with longer tenure gives a higher rate of interest than its shorter counterparts. 

Online recurring deposit

It is good to know that banks have made RD account opening facilities available online. It can be done on the Internet banking platform. 

Here’s the process:

  • You may go to the My Account section. 
  • Under it, you may find the e-TDR, e-STDR and e-RD account opening options. 
  • Click on that e-RD option. 
  • Select Debit account. 
  • Select the tenure of the RD account. 
  • Select the interest payment method. 
  • Put in the subscription amount. 
  • Submit it, and your recurring deposit account will be open. 
  • If you need a passbook, go to the bank and let them print it for you. 

The process of online recurring deposit account opening is quite easy and simple. Besides, the process itself is self-explanatory. 

All you need to do is select and tick those boxes displayed on the web page. 

You may also set the standing instructions online for future payments of the monthly installments. 

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3 thoughts on “Recurring Deposits: Should you Open an RD Account?”

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