Types Of Recurring Deposit Accounts In India

A recurring deposit is the most popular secure and low-risk investments in India. It offers an opportunity to invest without a lumpsum corpus. You get assured and fixed returns on such fund transfer. It is ideal for achieving your short-term financial goals.

Now, a typical RD account has a period ranging from six months to 10 years. You pre-decide the fixed instalments you make each month. Your RD interest rates get determined based on these aspects. However, different forms cater to needs. It is essential to understand them to benefit from them. Read on to find out:

Regular RD account: It is the most widely used form. It allows you to invest in monthly deposits for a pre-determined period. The recurring deposit interest rate you get is fixed and assured. It gets calculated as a compound or simple interest method based on the duration you choose. You can open it if you are aged 18 years or above.

RD account for senior citizens: These accounts provide additional benefits to the elderly. You can open it if your age is above 60 years. The main advantage is the higher recurring deposit rates compared to regular accounts. This rate gets compounded quarterly to result in higher maturity amount. An additional interest of 0.25 to 0.75% gets offered on this account. It is to aid the older citizens during retirement and in the absence of income.

RD account for minors:  Some banks also allow citizens under 18 years to open RD account. However, they get supervised by the minor's guardian or parents. The interest rate is either higher or lower than traditional RD schemes depending on the bank. It gets converted into a standard recurring deposit once the child becomes an adult. This scheme is to gather funds for children higher education.

RD account for NRI/NRE: Banks and financial companies also offer specialised RD schemes for Non-resident Indians. You can benefit from this by opening a Non-resident ordinary or Non-resident external account. The interest on the former is taxable at 30 per cent, while the latter does not allow taxability in India. It, however, facilitates account transfer to your home country. 

Flexi RD account: It lets you make investments in flexible instalments. You open the account with a core amount and add variables to it. This enables you to invest at your convenience whenever you have the availability of funds—failure in depositing the core amount results in a penalty. The same is not applicable for variables. You get the facility of tracking them through banking apps.

2 Types of RD Interest Rates

 One of the most popular and preferred investments in India are recurring deposits. They help people start earning returns every month throughout their tenure and inculcating a habit of saving in them. A lot of people trust banks and financial institutions for their products as they are safe, reliable and involve less risk. They are also providing guaranteed returns and allow investors to use their money for making more profit.

One can earn RD interest rates over a fixed tenure ranging from up to 5.2 per cent per annum on their RD account. They are like fixed deposits, but the flexibility of monthly instalments is a unique characteristic of this account. The minimum tenure for the deposit is six months and expandable up to 10 years.

The recurring deposit interest rates differ from banks and on various factors, including the investment category and tenure. Almost all banks have the facility of providing senior citizens with a higher rate of interest than regular customers. Banks offer a variety of interest rates, and apart from standard schemes, they also have additional ones reserved for people to achieve specific goals.

The following are the types of interest rates offered on RD by several banks in India:

1. Regular RD savings scheme: Indian banks offering recurring deposit schemes online through websites and banking apps have specific terms for citizens to follow. Only those individuals aged above 18 years can open this account. Customers can choose their deposit amount, which remains fixed for a tenure of six months to 10 years. The interest gets calculated on a simple or compound basis. They can withdraw the lump sum amount at the end of the deposit term.
   
   
2. RD schemes for senior citizens: Senior citizens can also benefit from a comparatively higher rate of interest from RD schemes. Moreover, there are also some schemes available that help them plan their retirement.

A person should be aware of the recurring deposit rates and choose the options to help them meet their investment goals. Smaller sums of money invested over some time multiply with interest and help them achieve specific goals. They are an ideal option for saving to spend on new gadgets, travel plans and other goals. It does not harm the budget at all and makes all the purchases economical.

These financial instruments help create goal-specific savings to help investors plan their budget. They also offer flexible payment facilities like daily, monthly, and quarterly payments which are accessible on the website as well as the app.