Recurring deposits (RD) are a prominent savings option among investors to fixed deposits and long-term post office schemes. Every month, one has to invest a certain amount for a specified term in a recurring deposit. The maturity amount is payable out to the individual at the completion of the tenure, which comprises the invested principal and the interest received. RD falls handy because you don't have a lump sum to invest for a short-term purpose, since it aims to invest a certain amount per month. Risk-averse investors with low risk appetite looking for guaranteed returns may consider an RD to build a portfolio to achieve the short-term financial target.
Either with a bank or the post office, one can open a recurring deposit account. The minimum deposit ranges from bank to bank, and a minimum amount of Rs 500 or Rs 1,000 may usually be deposited. In general, tenure extends from 6 months to a period of 10 years. In certain banks, the minimum term may be 12 months for online RD. For post office RDs, the capital amount is lower at Rs 10 per month, but the term of the fund is 5 years. The RD account can either be enabled offline by visiting a bank where you have a savings account or by signing in to the net banking portal of the bank. One needs to visit the nearest post office in order to open the RD in the post office.
Procedure to open an SBI RD account online
To open a RD account in SBI, follow the below-listed steps:
- First sign in your online SBI account and click on the e-RD (RD) / e-SBI Flexi Deposit button under the Fixed Deposit menu.
- Select e-RD (Recurring Deposit) on the page that opens, and click on the 'Proceed' icon to proceed.
- You will be now redirected to the next page where your active SBI accounts will be displayed.
- Select the account from which you are willing to invest towards your SBI RD account and enter the amount that you want to deposit monthly. Click on the provided tick box if you are a senior citizen.
- Now select the tenure for which you want to open an RD account. Remember that the minimum tenure of the RD account is 1-year. Click on the button 'View Interest Rate: Domestic Term Deposit' to view the tenure-wise rate of interest.
- Select the "Payback Principal and Interest" option to get the maturity amount deposited into your savings account. Or else, choose the "Convert to STDR" option if you choose to turn the maturity amount to FD.
- Click on the "I accept the terms and conditions" and click on the 'Submit' button.
- The name of the nominee specified in the savings bank account will appear on a page with all the specifics that you have entered.
- Now click on 'Yes' if you are willing to keep the same nominee for your RD account or else select the option "Do you want the nominee/s to be mapped to your term deposit account" and confirm.
- Notification for confirming same m=nominee and opening of your RD account including rate of interest, maturity date and maturity amount and all other related specifics will be confirmed on a page. By clicking on the "View/Print" option, you can print the page.
- Click on the 'Set SI' button to deposit the monthly amount automatically.
- You will be now redirected to a new page where you will get the specifics of installment amount, date of payment, your RD account along with the account from which monthly installment will be paid, number of installments and so on. Click on the "Confirm" button to open the auto-pay service after verifying the specifics.
Key takeaways of SBI RD scheme
An individual can reap a plethora of benefits from SBI RD scheme, some of them are as follows:
- A loan against the balance invested in his or her RD can be used by individuals. An amount up to 90 percent available in the RD account can be availed as a loan. Apart from the loan facility, SBI even allows overdraft facility against the RD account.
- The maturity period ranges between 12 months and 120 months for the deposit. Consequently, unlike other RDs, at the mercy of the account holder, the recurring deposit provided by SBI can also be used as a long-term investment option.
- One can prefer to use an RD nomination service, in which their spouse or other family members can be chosen to be the nominee of the final amount accrued in the RD.
- SBI enables minimum deposits on their RD account for multiples of Rs. 100. Individuals from every SBI bank branch can use the facilities of the SBI RD scheme.
Applicable charges/penalties on SBI RD account
Based on some conditions SBI imposes some penalties/charges on RD accounts. Some are as follows:
- Individuals keeping an account for a period of five years or longer will be levied a penalty of Rs. 1 for every Rs. 100 if the due monthly instalment is not paid.
- Similarly, the penalty imposed will be Rs. 2 on every Rs. 100 if the account is kept for a period of 5 years or more.
- A service charge of Rs. 10 will be imposed on individuals who have three or more consecutive failures in the payment of monthly instalments when the RD account hits the maturity period.
- The account will be terminated with the amount paid to him/her prematurely in case the individual lacks to render six consecutive payments towards his or her RD account.
Taxation on SBI RD account
According to the Income Tax Act, 1961, RD is subject to taxation. The amount invested in an RD is liable for in the annual income of an individual, and the interest received on it earns 10 percent of TDS or Source Tax Deduction. That being said, TDS on RD is only effective if in a fiscal year the gross interest received is over Rs. 10,000. By submitting Form 15H or Form 15G, individuals can avoid TDS applicable to their interest income. Individuals can, however, confirm that they submit the forms to take advantage of the tax deductions before filing their income tax returns.
SBI RD Rates
|Tenure||ROI in % for general public||ROI in % for senior citizens|
|1 year to 1 year 364 days||5.00||5.50|
|2 years to 2 years 364 days||5.10||5.60|
|3 years to 4 years 364 days||5.30||5.80|
|5 years to 10 years||5.40||6.20|