Recurring deposit is an investment tool provided by the banks and NBFCs, allowing the depositor to deposit a minimum amount in the account and receive a decent return at the end of the maturity period. Recurring deposit account, due to its flexibility fosters the habit of savings among people. It is the most widely used term deposit which allows the depositor to invest the amount of their choice; however, premature and mid-term withdrawals are not supported in case of a recurring deposit.


Salient features

The extensive use of recurring account has enabled the people to enjoy the flexibility in investment for savings. Unlike other term deposits, a recurring deposit account has no terms of investment in respect of the amount to be deposited in opening the savings account. The key features of a recurring account are as follows:


  • Minimum account: One of the most significant features of a recurring deposit is that it can be opened with the bare minimum amount. It provides ease in investment into the account, bearing the flexibility of the amount to be deposited. Therefore anybody can open his recurring deposit with the minimum possible amount as less than Rs 100.


  • Terms of interest: In case of a recurring deposit, the interest accrued on the principal amount gets accumulated till the maturity period and adds up to the principal amount, thus creating the maturity amount. Interest on deposit is calculated on the basis of simple interest calculation. The rate of interest is generally higher than other term deposits.


  • Range of tenure: Recurring deposit allows free choice of deposit period ranging from six months to 10 years. The depositor need not worry about the long term fixed deposit of his amount and unavailability of the savings at the time of need. Usually, a recurring deposit allows the minimum tenure of 3 months.


  • Withdrawal rate: The terms of withdrawal in a recurring account are limited to the maturity period. Premature withdrawals may lead you to incur a penalty. In case of a penalty, the depositor shall not be entitled to the incentives offered by the bank on the term deposit.


  • Saving Account: Recurring account more or less bears the features of a savings account, thereby enjoying the benefits similar to that of fixed deposit offering a high rate of interest as compared to other investments.


  • Reinvestment: Using a recurring deposit you can reinvest on your existing principal amount in numerous times as you like. You are thus creating a good amount of savings to serve your purpose well. The absence of rigidity in investment enables the borrower to invest according to his convenience.


Benefits of opening a recurring deposit account


The extensive use of recurring deposits entirely rests on the advantages it provides to its customers. List of benefits a depositor enjoys on opening a recurring deposit are:


  • Meeting short term goals: Opening a recurring deposit is of great interest to serving short term goals or purpose. Owing to its wide range of tenure options one can opt for this term deposit to avail himself the required amount to serve his purpose within the specified period. Recurring deposit account perhaps is the best financial plan to meet your short term goals more conveniently.


  • Ease of deposit: The choice of recurring deposit is more popular among the salaried people due to the need for a fixed sum deposits every month. They can easily keep aside a part of their salary to deposit every month. Moreover, the ease of investment involves the online opening of a recurring account where the depositor can deposit his sum conveniently from one place, thus saving his time and inconveniences of traveling.


  • Considerate interest rate: Recurring deposit provides the depositor with the benefit to enjoy a high yielding interest rate on his deposit, thus creating an income. Generally, the interest rate varies from 5-7.5% as per the plan is chosen by the depositor. Thus recurring deposit ensures its investor with the guaranteed returns and fixed-rate of interest rate free from the market influence.


  • Use of flexible recurring deposit: Banks has added up to the flexibility of recurring deposit account by the introduction of a flexible recurring deposit scheme where the depositor can withdraw his savings before the maturity period without incurring any penalty against it.


  • Guaranteed returns: Savings in the recurring deposit is considered as the safest mode of money investment as it does not influence the market conditions. There is no fear of loss of money in case of inflation or deflation in the market rates. The deposited amount remains constant irrespective of the external affairs of the market.


With respect to the inherent features and benefits of the recurring deposit account, one can quickly start his savings plan in the safer hands by mere documentation. A recurring deposit is similar to having several fixed deposits each holding the same maturity period.



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