Recurring deposits (RD) are a popular savings and investment option offered by banks and post offices. It encourages disciplined saving by requiring you to deposit a fixed amount every month for a fixed period.
How it works:
- You choose a fixed amount to deposit every month.
- You choose a tenure for your RD (usually between 6 months to 10 years).
- Interest is calculated on the amount deposited and is compounded on a quarterly basis.
- At the end of the tenure, you get the total amount invested plus the accumulated interest.
Benefits of RD:
- Disciplined savings: Helps develop a habit of regular savings.
- High returns: Offers better interest rates than regular savings accounts.
- Safe investment: Considered a low-risk investment option.
- Flexibility: You can choose the deposit amount and tenure to suit your needs.
Key features:
- Minimum deposit: Varies bank to bank, but it is generally low.
- Interest rates: Generally linked to fixed deposit rates.
- Loan against RD: Some banks offer loan against RD.
- Nominee facility: You can nominate a beneficiary for the maturity amount.
