Recurring Deposit (RD)- All You Need to Know?

A Recurring Deposit, known as RD, is a unique term-deposit, an investment tool that allows people to make regular deposits and earn reasonable returns.The customer can be assured of regular income earned as savings by holding an RD account, which will be paid out along with the principal amount invested in the account after the maturity period. Here is all about recurring deposits you need to know.

Features of a Recurring Deposit Account

• People are encouraged to save on a regular basis.
• The minimum deposit amount varies greatly from bank to bank but you can start from a minimum 1000 amount.
• Its deposit period is minimum six months and maximum ten years.
• Interest offered is the same as fixed deposit.
• Premature withdrawals are prohibited.whereas depending on the bank, you may be able to close your account before the maturity date if certain conditions are met.

Eligibility Criteria

• Anyone can open a RD account.
• Any minor over the age of ten is eligible to open a recurring deposit account if he or she provides proof of identity.
• Any type of government organisation.

Required Documents

• Application form available from the bank where you want to open the recurring deposit account.
• Passport size photo
• Identity and address verification of the applicant seeking to open a recurring deposit account.
• If the bank requests it, you must provide KYC documents.

How to open RD account online:

• Login to net banking for opening a RD account online
• Select an option of opening a new RD account
• Fill out the details such as tenure and instalment amount
• Now link your savings account to your RD account.

How to open RD account offline:

• Go to the nearest bank branch
• Fill out the form for opening a RD account.
• Submit the form with a cheque paying the instalment amount.
• Provide KYC details, if required.

Premature Withdrawal

• If the account holder withdraws the deposited amount before it matures, the rate of interest received will be the one that was in effect during the time the deposit was with the bank. The bank will also charge a 1% penalty for early withdrawal of recurring deposits.
• Bank interest rates vary according to the bank's policies.
• However, in the event of a premature withdrawal, some banks would reduce the interest rate by 1% to 2% for the period during which the deposit remained in the bank.
• The minimum lock-in period for an RD account is usually three months. If a premature withdrawal is made before this period, the account holder will earn no interest and the bank will only refund the principal amount deposited.
• In addition to the interest penalty, the depositor is ineligible for bank incentives on recurring deposits.