A Recurring Deposit is similar to an SIP (Systematic Investment Plan), in a mutual fund. You want to invest in a fixed deposit but do not have sufficient money to do so. A recurring deposit is similar to a fixed deposit, only you invest small sums of money regularly which earns an interest equal to a fixed deposit. You will have to first open a savings bank account in your bank. You deposit money into this savings bank account. A fixed sum of money is deducted regularly (say each month), from your savings bank account and transferred to your recurring deposit.
Why invest in Recurring Deposit Account?
You can start small
Find investing a large amount in fixed deposit difficult? Invest small sums of money and earn interest at the same rate as a fixed deposit.
Rate of interest in fixed
The rate of interest is fixed when you invest in a recurring deposit. You are insulated from a swing in the interest rates.
You invest a fixed amount of money and can withdraw your money, only after a certain fixed time. You are forced to save.
Plan your goals
You can set money aside for short-term goals such as marriage expenses, buying a car or even going on a holiday.
Eligibility for Recurring Deposit Account
If you are a resident of India, you can open a Recurring Deposit Account. A recurring deposit at a bank can be opened with an amount as less as INR 100 a month. Some private banks require you to make a recurring deposit of at least INR 500 a month.
What is the tenure of your Recurring Deposit?
The tenure of Recurring Deposit is a maximum of 10 years. It would be a good idea to invest your money in a recurring which matches your financial goals.
Interest on your Recurring Deposit
Many recurring deposits pay an interest rate of 8.5-8.7% a year. This interest rate can go as high as 9-9.2% a year for a recurring deposit, if you make a deposit of 1-5 years.
How to apply?
- You can apply for a recurring deposit account at your nearest bank branch. You have to fill the application form and submit the relevant documents.
- You require proof of identity and address: passport/driving license/voter’s identity card/PAN card/ration card/recent utility bills/credit card bill. This is necessary for the KYC (Know Your Customer), procedure.