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Recurring deposits (RDs) are considered one of the most secured investment options. RDs offer a fixed rate of returns and does not depend on the markets. We have covered the following in this article:

1. What is Recurring Deposit?

Recurring deposits are an investment instrument offered by banks and post office. Under this, investors can invest a nominal amount monthly. The banks provide a fixed rate of return on the investment, which is compounded periodically. RDs are an excellent option for those looking to invest their monthly savings and risk-averse investors.

The returns offered on RDs are not tied to the market movements, and hence, investors consider RDs to be a safe investment option. However, the returns offered on RDs are revised on a periodic basis, depending on various economic factors such as RBI monetary policy decisions, lending rates, and so on. Nevertheless, RDs provide much higher returns than a regular saving bank account.

2. Features of Recurring Deposit

  • As you invest in RDs with a bank, investment is considered to be safe
  • RDs provide much higher returns than a regular savings bank account
  • Investors are provided with assured returns as they are not tied to the market movements
  • The investment tenure of RD ranges from 6 months to 10 years
  • Investors can avail loan against their RD investments at times of a financial crisis
  • Investors can give a standing instruction to their banker to debit a certain amount from their account and invest it in their RD account
  • Premature withdrawals are available; hence the RDs are liquid

3. Benefits of Recurring Deposit

Investing in recurring deposits come with a slew of benefits, and the following are a few of them:

  • Investors can invest a nominal amount of as low as Rs 10 a month
  • Investments can be made online sitting at home or office, as per the investors’ comfort
  • If there is a financial emergency, the investors can avail secured loan against their RD investment
  • Premature withdrawals can be made if the investors are in dire need of funds
  • Investing a small amount every month will help investors develop a sense of financial discipline over time
  • No matter what the market condition is, RD investments will continue to earn interests

4. How to Open Recurring Deposit

Opening RD is very simple. It can be done both online and offline, as per the investors’ wish. The following are the steps to open an RD account online:

  • Log in to the selected bank account
  • Navigate to the personal banking section
  • Click on the ‘deposits’ section
  • Select the ‘recurring deposit’ option
  • Fill up all the requested information, upload the relevant documents and submit
  • Transfer the amount as entered in the previous section and repeat the process periodically

The following are the steps to open an RD account offline:

  • Visit the nearest branch of the bank with which you would like to open RD
  • Duly fill the offline application form
  • Attach the required documents with the application form and submit
  • Deposit the amount by cash, demand draft or cheque, and continue this process periodically

Investing in recurring deposits is an excellent way of investing small amounts regularly. It will help investors develop financial discipline in the long run as they are forced to set aside a fixed sum each month. Recurring deposits offer fixed returns as they are not associated with the market movements.

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