Recurring Deposit Interest Rates

The recurring deposit interest rates vary from bank to bank and according on your category and tenure selection, among other things. Seniors are given preference over other residents by almost all banks, who offer them a higher interest rate.

Looking at the RD Interest Rates 2024, you must have realise that banks provide a wide range of recurring deposit plans these days. In addition to the standard program, participants can also access a few extra special programs to assist them achieve their objectives.

Eligibility Criteria

The answer to ‘what is RD’ should be clear by now. If so, let’s come to the eligibility criteria Banks or NBFCs will want to see while processing your application for opening an RD account. For starters, you can only open a recurring deposit account if you hold a savings account. 

Other eligibility criteria for a recurring deposit are as follows: 

●  Savings Account: As mentioned, holding an individual savings account in any RBI-registered bank or even in the Post Office is crucial to open an RD account. 
●  Age: Any minor above the age of 10 can enrol themselves into an RD investment plan by opening an RD account. However, minors equal to or less than ten years of age will need legal guardianship to open a recurring deposit account. 
●  Organisations: Not only individual minors, adults, and senior citizens, but organisations and entities can also open a recurring deposit account. From government organisations to commercial, proprietorship and corporate firms, everyone can open an RD account. 

Required Documentation

To open a recurring deposit (RD) account, you’ll need the following requisite documents: 

●    Recurring Deposit application form (offline or online)
●    ID Proof such as your Aadhaar card, Voter ID card, Passport, PAN card, etc. 
●    Address Proof such as your Aadhaar Card, Utility Bills, etc.
●    Passport-size photographs with clear image quality
●    KYC Documents (If asked by the bank or NBFC)
●    Details of your individual savings account (account number, IFSC code, etc.).

Features of RD Account 

Now that you know the recurring deposit meaning let’s check some of the primary features of a recurring deposit account in today’s banking environment: 

● Fixed Income Investments: Recurring deposits are considered a popular type of fixed investment spending for a stipulated period with assured return on maturity. The bank or NBFC informs the interest rate on the recurring deposits before the onset of the investment. Furthermore, throughout the duration of the deposit, the interest rates remain constant.

● Minimum Investment: To open a recurring deposit account, you must make a minimum investment of INR 100 every month. However, RDs are only ideal for investment (in terms of the return) if you hold an excess income of at least INR 1000 every month. 

● Time Period: A recurring deposit ((RD) account can be opened for a period of no less than six months and a maximum of ten years. A recurring deposit, or RD for short, allows you the freedom to select the timeframe that works best for you.

● High-Interest Rate: Regular savings accounts offer lower interest rates than recurring deposits. When it comes to RDs, the interest is typically compounded every quarter.

● Lock-In Period: Depending on the lender, the minimum lock-in period of a recurring deposit account can be 30 days, whereas the maximum can be three months. You won’t earn any interest if you withdraw the investments during this lock-in period. 

How to Calculate Interest Rate for Recurring Deposit Scheme? 

Interest Rates and Returns on a Recurring Deposit

Today, multiple banks and non-banking financial institutions across the nation offer recurring deposit investment choices. This is why RDs come with highly competitive rates of interest. 

The interest rates can differ from the range of 5% to 8% based on the existing market trends at the time of opening the RD account. However, for most banking institutions, the average interest rate on RD accounts ranges between 6% to 7%. 

Also, the investor’s age plays a key role in determining the RD interest rate. For example, banks or NBFCs offer higher rates of interest to senior citizens when compared to others. The type of RD scheme, RD tenure, and the invested funds determine how much interest rate you can get. 

Furthermore, calculating the interest is a good way to determine how much return you will get from your recurring deposit. You can either find the returns using an RD calculator or manually via a formula. Here’s how to calculate your

RD interest returns manually: 

M = R [(1+i) n – 1]/ 1 – (1+i) -⅓ 

1. ‘R’ is the monthly instalment, 
2. ‘i’ is the interest rate/400, 
3. ‘n’ is the number of quarters, and 
4. ‘M’ is maturity value

Types of RD Interest Rates 

Of course, there are the typical RDs that let you invest money to earn interest and multiply your corpus. Besides that, there are other types of RDs available in the market, too, each catering towards the explicit needs of different investors. 

● Minor Recurring Deposit Account: Underage people will have these accounts made in their names, but only with the supervision and consent of their legal guardians or parents. 

Like traditional RD accounts, a predetermined monthly amount and term will be set when the account is set up. The returns may well be similar to or somewhat higher than those of conventional RD accounts.

● Recurring Deposit For Senior Citizens: The senior citizens’ program offers higher and more attractive interest rates than the normal accounts while having the same perks and features as a standard RD. 

Senior individuals can easily satisfy their short-term financial needs without an ordinary income by withdrawing a larger maturity value, thanks to the interest being compounded quarterly in accordance with the applicable rate of interest.

Typically, the higher interest rates provided by different banks or NBFCs on the senior citizen recurring deposit programs range from 0.25 to 7.5 per cent over the rates for standard deposits.

● Recurring Deposit For NRE/NRI: Among the best investment possibilities for NRIs is RD proposals. Even a tiny recurrent monthly commitment can result in significant financial rewards. NRIs may enroll in RD schemes either via an NRO or NRE RD account.

RD Interest Rates for Premature Withdrawal 

Under a recurring deposit account, consumers can withdraw funds prematurely with an applicable penalty fee.
With most RD plans, early withdrawal is prohibited; the RD sum may only be withdrawn upon scheme maturity.

However, by terminating the account, one can withdraw the RD amount prior to maturity in the event of an exigency.

The interest that has accumulated on your RD amount up to the time that the money was with the bank may be reduced by the bank by 1% to 2% as a penalty.

It's crucial to keep in mind that an RD account has a minimum lock-in period of three months. If the depositor chooses to withdraw money early, they will only receive their principle back and will not be charged interest.

Conclusion

RDs, or Recurring Deposits, are considered the most popular, safe, and reliable form of investment among Indians of all ages. Opening an RD account has become a more profitable approach to earning higher interest returns than what one earns from a regular savings account. 

With more and more banks and NBFCs offering recurring deposit schemes in the market, things have become simpler and more lucrative for regular investors. From highly competitive interest rates to minimal documentation, a lot has become simpler with the surging demand for this investment scheme. 

A recurring deposit is an ideal solution if you seek higher interest income over a stipulated period without any hassle.