Recurring Deposits (RD) can be an ideal investment for those who are looking to save on monthly basis. This financial tool will help them to meet short-term goals without much financial deviation.
In Recurring Deposits, a monthly pre-fixed amount from your savings account is made towards the Recurring Deposit account and at the end of the tenure the bank pays back the principal amount along with the interest.
Here are 6 Smart Things to Know on Recurring deposits
The minimum tenure to be deposited is for 6 months to 120 months. Banks allow to withdraw the amount prematurely with some penalty. However, partial withdrawal is not allowed in RDs. For NRI customers, the minimum tenure of RD is 12 months in some banks.
In India, one can start with as low as Rs 100 and in multiples of Rs 10 and there is no upper limit in SBI or any other govt banks.
For most of the private banks, the minimum amount is Rs 1000 and maximum can be Rs 14,99,900 per month.
3) Who can open recurring deposits?
- Resident individuals
- Hindu Undivided Families
- Private & Public Limited Companies
- Trust & Societies
TDS is applicable when interest is payable or reinvested in an RD per customer across all branches, exceed Rs 10,000 in a financial year. However, this is not applicable in the case of post office recurring deposits.
5) Payment options
Generally, once the installment amount is fixed it cannot be altered at any later date. Interest is paid only on maturity along with the principal amount.
In case of premature withdrawal, the interest rate applicable will be lower of the base rate or interest will be paid at the rate applicable on the date of deposit, for the period maintained.
6) Default Payments
If there is frequent non-payment in the account, and six installments fall in arrears, the Bank has the right to close your account.