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When you want to save a fixed amount every month, then you can go for recurring deposits. Banks and post offices offer it for different tenures. 

What are the benefits of the recurring deposits? 

Recurring deposits are the best scheme for you if you want to build a strong savings habit. It gives you interest on your deposits.

Here are some benefits of the recurring deposits:

• This is a safe investment option. You don't have to worry about the Market because it gives you a fixed interest rate return.
• Recurring deposits give you better interest than a savings account. 
• After the end of tenure, you get your deposited money plus interest earned from that.
• You don't need many documents for this; you can open it in your bank only with KYC.

Recurring deposit schemes are the best option to save a fixed amount every month and earn guaranteed returns. 

Which banks offer recurring deposits? 

Almost all the big public sector and private sector banks do offer recurring deposit schemes. Here are some examples. 

State Bank of India (SBI) Recurring Deposit Scheme.

State Bank of India offers various features in recurring deposit schemes. 

• In SBI, you can open recurring deposits for 12 months to 120 months (10 years).
• You can start a deposit from ₹100 per month and make additional deposits in multiples of ₹10.
• You can open an RD in almost every SBI branch.

What happens if you miss the RD instalment in SBI? 

You should make payment of monthly deposits on time; otherwise, banks can charge penalties.

• If your RD’s tenure is up to 5 years, the penalty is generally ₹1.50 for every ₹100 of the monthly instalment.
• If your RD’s tenure is more than 5 years, you have to pay ₹2 for every ₹100 of the monthly instalment.

If many installments are pending, the bank can close your RD. To avoid this situation, you can opt for an auto-pay option in the bank. 

Can I close my account before maturity? 

Yes, you can. You can close before maturity, but the bank can charge a penalty and pay interest at a lower rate than originally applicable.

• If your RD principal amount is up to ₹5 lakh, the penalty is 0.50%.
• If your RD principal amount is more than ₹5 lakh, the penalty is 1%.

Closing your RD earlier can reduce your interest. 

Axis Bank Recurring deposits (RD)

You can save monthly with the Axis Bank RD. You don't need large amounts of money to start; you can initiate your RD with only ₹500 per month. Choosing tenure is up to you. There are 6 months to 10 years options of tenure. 

Eligibility of RD

• You should be an Indian resident.
• Non-Resident Indians (NRIs) through NRE or NRO accounts
• Hindu Undivided Families (HUFs)
• Joint account holders can also open it.
• Companies, trusts, clubs, and other institutions can also open it.

Punjab National Bank (PNB) Recurring deposits 

You can start an RD in PNB with an amount of ₹100 per month, and deposits can be made in multiples of ₹1. Also, in PNB, the maximum monthly deposit allowed is ₹25 lakh per customer. Here are some features of the Punjab National Bank RD.

• You can open an RD for 6 months to 120 months (10 years).
• You can go for an automatic deposit facility too. 
• If you are a senior citizen aged 60 years to below 80 years. You can receive a higher interest rate.
• And super senior citizens who are more than 80 years old can receive an even higher interest rate.

What is the interest rate of recurring deposits?

Every bank offers a different interest rate on recurring deposits according to their tenure. Here are some banks' interest rates for individuals and senior citizens for 6 months. 

SBI offers interest on recurring deposits at the same rate applicable to its term deposits (fixed deposits).

Conclusion

A recurring deposit is a scheme where you deposit a fixed amount monthly and earn interest on it. If you want to build a savings habit, this scheme is best, plus it gives you interest. Many banks and post offices offer RD for various tenures with different interest rates 

You can start saving money by opening a recurring deposit in banks. Before going for it, always compare the interest rate and penalty charges. And to get such information about finance, stay connected with Loansjagat.

Frequently asked questions 

What are the disadvantages of RD?

Recurring deposit is for only a small fixed monthly investment. You can deposit from ₹100. But the interest rate on it is very low. And the interest earned on this is taxable.

Can you take a loan against an RD?

Yes, you can take a loan against an RD, but the loan amount is usually 70% to 90% of the RD balance. If you have a post office Recurring Deposit, you can get a loan of up to 50% of the balance. 

Can RD be closed anytime?

Yes, it is possible to close your RD anytime in the bank . Post Office Recurring Deposits have a minimum lock-in period of 3 years. That means you cannot withdraw the deposit before completing three years.

What is the penalty for RD in the post office?

If you are withdrawing money from recurring deposits, you need to pay a penalty. If you miss or delay an RD installment, the bank or post office may charge a penalty. In a Post Office RD, the penalty is ₹1 for every ₹100 deposited for each month of delay.

What is the difference between a Fixed Deposit and a Recurring Deposit?

FD and RD are both savings schemes, but they work differently. In fixed deposits, you need to invest a lump sum amount at one time. You earn fixed interest in it. And in recurring deposits, you need to deposit a fixed amount every month, and you earn interest on it. 

What is the minimum tenure of a Recurring Deposit?

In most Indian banks and post offices, you can open recurring deposits for 6 months. Post Office RDs have a fixed minimum tenure of 5 years (60 months). This is the minimum tenure for recurring deposits. 

How is interest calculated on a Recurring Deposit?

Interest on a Recurring Deposit (RD) is calculated compounded quarterly. Each deposited amount earns you interest. 

What if I miss an RD installment?

 If you miss an RD instalment, the bank will charge a penalty on the overdue amount. Many banks charge ₹1.50 to ₹2.00 per ₹100 per month. 

Is the interest earned on an RD taxable?

Yes, in India, when you earn interest on an  RD, it is taxable. This interest is added to your total income and taxed according to your income tax slab. But the money you deposit every month is not taxable.