Bank Recurring Deposits (RDs) are type of deposits where you need to invest an amount each month, which will help you in saving small amount at regular intervals.
Individuals who are looking for compulsive savings, RDs is an excellent approach as it will make you to go for disciplined investment. It is an way for risk averse people who look for safe and secure returns.
Interest rates on recurring deposits are compounded quarterly. Suppose, you decide to put Rs.2000/- every month in a recurring deposit for 24 months at 8.75 per cent.
The bank will pay you an interest rate on Rs 2000/- on the first month by compounding it quarterly for 24 months. Next month it will pay interest compounding it quarterly for 23 months and so on. Click to know how is interest rate on recurring deposits calculated?
Interest earned on RDs are not tax free, so it is best for people who fall in lower income tax bracket. However, banks don't deduct tax at source on Recurring Deposits, but the interest earned is taxable as per one's tax bracket.
If you are in a very high tax bracket of 20 and 30 per cent, then RDs would not be better option due to heavy tax liability. Click to know how is interest on recurring deposits or RDs taxable in India?
Here are list of private Banks offering highest interest rates:
Development Credit Bank
This bank is offering interest rate at 8.15 per cent and above for tenure of 1 year it is offering at 8.30 Per cent.
Ratnakar Bank is offering RD interest rate at 8.75 per cent for tenures ranging from 1-5 years.
HDFC Bank is the second largest private sector bank in India. HDFC Bank is offering maximum interest rate at 7.90 per cent. The tenure of the deposit is from 12 months to 60 month. The minimum amount one can invest is Rs 1000 and in multiples of 100 thereafter.
ICICI Bank offers a flexible RD scheme with name iFlexi RD plan. There are no penalties for delayed payments. The maximum interest rate they are offering is 7.90 per cent with the deposit period of 15 months to 60 months under regular RD scheme.
Axis Bank is offering interest rate at 7.90% with the deposit period of one year. The recurring deposit can be opened with minimum deposit amount if Rs 1000 and in multiples of 500 thereafter.