Recurring Deposit: Characteristics
• An RD account must have a minimum monthly investment of Rs 100.
• The minimum and maximum holding periods for deposits in RD accounts are six months and 10 years, respectively.
• Savings accounts pay less interest than accounts with RDs.
• For banks, quarterly compounding is standard.
• RD accounts have a lock-in period that can range from 30 days to 3 months, depending on the bank. Regarding withdrawals made within the lock-in period, no interest will be paid.
• As a single account holder, you are allowed to open an unlimited number of RD accounts.
• A few post offices and banks accept deposits in advance.
• Partial withdrawals are not permitted.
• If done too soon, the withdrawal of funds is subject to a fee.
• Make periodic payments as opposed to one large payment, like with a set deposit.
• Create standing instructions to automatically take your installment payments from your savings account.
• The interest rate for older folks may be increased by 0.5 percent.
Recurring Deposits: Benefits
Investors may make consistent monthly deposits and accumulate savings over time with the help of investing instruments like recurring deposit (RD) accounts. Investors are free to select the deposit period and monthly payment amount that best suits their needs. RDs are frequently favored by consumers looking to open an account to save for unforeseen expenses since they tend to be more flexible than fixed deposit programmers.
Encourages Saving Behaviors.
• There is no fee if an RD installment is missed for a month.
• There will be a higher interest rate than in a savings account.
• A recurring deposit account must be opened with at least Rs. 100.
• Opening an RD account is straightforward, especially if you already have a savings account.
• Simple approach for documenting. Existing members are not required to submit documentation.
• Excellent way to save money to achieve your short-term objectives.
Eligibility for RD account opening
The following groups of persons fall under this eligibility:
• Local Indians
• Elderly people
• Minors under parental or guardian supervision
• Non-resident Indians
Documents needed to start a RD account
• Passport
• Card PAN
• Driving permit
• Voter ID
• NREGA job card
• Card Aadhar
Early withdrawal from recurring deposit
• The interest rate that the account holder receives if they withdraw the money from their deposit before it matures will be the same as the rate that was in effect when the deposit was made to the bank. There will also be a 1% penalty for early withdrawals of recurring installments.
• Depending on bank policy, different interest rates are given by banks.
• Some banks would deduct interest rates by 1% to 2% in the case of an early withdrawal.
• At least three months must pass before RD accounts may be unlocked. If the withdrawal is made prior to the expiration of this term and no interest has been received, the bank will only repay the original amount that the account user first placed.
• In addition to the interest penalty, the depositor is not qualified for bank incentives on recurring deposits.
Source from: navimumbaihouses
