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RD Interest Rates of Major Banks for Tenure up to 2 years (Aug 2019)

Recurring Deposit (RD) Interest Rates of Major Banks August 2019

RD Interest Rates of Top Banks (August 2019)

In this article you will find the Recurring Deposit (RD) Interest Rates provided by major banks in India. These interest rates are as on last updated by the respective websites.

Below are the Recurring Deposit (RD) Interest Rates offered by major banks for various durations :

Recurring Deposit (RD) Interest Rates for tenure up to 2 years

Recurring Deposit Interest Rates of Major Banks for Tenure up to 2 years August 2019
Source : Bank website
Recurring Deposit Interest Rates of Major Banks for Tenure up to 2 years August 2019
Source : Bank website
Recurring Deposit Interest Rates of Major Banks for Tenure up to 2 years August 2019
Source : Bank website
Recurring Deposit Interest Rates of Major Banks for Tenure up to 2 years August 2019
Source : Bank website

Recurring Deposit (RD) Interest Rates for tenure from 2 years up to 10 years

  Recurring Deposit Interest Rates of Major Banks for Tenure above 2 years upto 10 years August 2019
Source : Bank Website
Recurring Deposit Interest Rates of Major Banks for Tenure above 2 years upto 10 years August 2019
Source : Bank Website
 Recurring Deposit Interest Rates of Major Banks for Tenure above 2 years upto 10 years August 2019
Source : Bank Website
Recurring Deposit Interest Rates of Major Banks for Tenure above 2 years upto 10 years August 2019
Source : Bank Website

Notes :

  1. Citibank provides RD’s with minimum tenure of 1 year and maximum tenure of 2 years.
  2. All the banks mentioned above offer 0.50% extra interest rates for senior citizens.
  3. Only Bandhan Bank offers 0.75% extra interest rates for senior citizens. And Axis Bank provides variable higher interest rates for senior citizens.

Summary

  • Bandhan Bank provides the highest interest rates 7.65% on RD’s for maximum tenure (120 months), while IndusInd Bank provides the highest interest rates 7.60% on RD’s for 1 year tenure (12 months).
  • IndusInd Bank also provides the highest interest of 7.75% for the tenure from 18 months to 24 months.
  • HDFC Bank, Kotak Mahindra Bank, IndusInd Bank, Yes Bank, DBS Bank and IDFC Bank also provide high and competitive interest rates on RDs.

Features of Bank Recurring Deposit

Bank Recurring Deposit or RD is an investment instrument that allows investors to make regular monthly payments. It is also a means to save money for the long term. Investors can choose the tenure of the deposit and the minimum monthly payment they wish to make according to their convenience. Recurring deposit schemes are generally more flexible than bank fixed deposit. They are generally preferred by those who want to start an account to save money and build an emergency fund.

Almost all the banks in India offer a recurring deposit account. Interest rates depend on the market trends prevalent at the time of creating the account. Once you open an account and begin investing, the interest will remain the same for the duration chosen. For this reason, RD schemes make a great choice for salaried individuals who earn a fixed income every month and can invest a regular amount every month.

If you miss several consecutive payments, the bank may choose to close down your recurring deposit account. Some recurring deposit schemes are also flexible in the way they allow you to make payments anytime during the month.

The bank has special powers to end an RD account before its maturity. The bank can utilize the funds in recurring deposit accounts for lending to businessmen. The bank may also invest these funds in profitable areas.

A customer can give standing instructions to the bank to credit the recurring deposit account every month from his/her savings account or current account.

Bank Recurring Deposit has the following characteristic features:-

1] Entry Age Restriction –

A person needs to be above 18 years of age to open and deposit in a bank recurring deposit. Minors can open a bank recurring deposit, but it is to be operated by the natural guardian.

2] Investment Conditions –

Bank recurring deposit has a certain investment conditions. In India, a minimum of Rs. 100 per month have to be deposited at regular intervals in the recurring deposit account.

There is no limit on the maximum amount that can be deposited in a recurring deposit account.

3] Interest Rates –

The interest rate offered by banks on recurring deposits varies from bank to bank. The rates of return vary depending on the tenure of the deposit selected. For medium-term deposits, the rates are generally the highest. For long-term deposits, the rates are usually slightly lower as the deposit holder stands to gain a higher amount of interest overall.

A method of earning on the capital deposited is to invest in the deposit that provides a high rate of interest with the tenure being as short as possible.

Senior citizens receive higher interest rates as compared to general individuals.

Bank recurring deposits currently have interest rates ranging around 6.25% to 7.25% per annum.

Given below are Interest Rates of Recurring Deposit of Major Banks August 2018:-

Bank

Interest rates on Recurring Deposits
For General Individuals

For Senior Citizens

Axis Bank

7% to 7.1%

7% to 7.3%

Citibank

6% to 7%

6.2% to 7.2%

Federal Bank

7%

7.50%

HDFC Bank

6% to 7.25%

6.5% to 7.75%

ICICI Bank

6.6% to 7%

7.1% to 7.5%

IDBI Bank

6% to 6.75%

6.5% to 7.25%

Kotak Mahindra Bank

6.5% to 7.25%

7% to 7.75%

Punjab National Bank

6.25% to 6.75%

6.75% to 7.75%

State Bank of India

6.7% to 6.85%

7.2% to 7.35%

Yes Bank7.10%7.60%

Given below are interest rates on recurring deposits offered by small finance banks:-

Recurring Deposit

Bank

Interest Rates

AU Small Finance Bank

6.75% to 7.25%

Equitas Small Finance Bank

7% to 8%

Suryoday Bank

7.5% to 8.5%

Ujjivan Small Finance Bank

6% to 8%

4] Tenure of Deposit –

Tenure of deposit is the time duration for which an investor deposits/invests his/her funds. The funds remain locked-in for this tenure (early withdrawal subject to conditions). The tenure of bank recurring deposits is from 6 months to 10 years.

The tenures are divided into three categories:

  • Short-Term Tenure: A short-term tenure usually lasts from 6 months to a year.
  • Medium-Term Tenure: A medium-term tenure usually lasts from more than a year to 5 years.
  • Long-Term Tenure: A long-term tenure lasts from more than 5 years to 10 years.

5] Nomination Facility –

Bank recurring deposit provides nomination facility. Nomination is a facility that enables deposit account holders to nominate an individual. He/she can claim the proceeds of the deposit accounts or contents of the safe deposit lockers, post the death of the original depositors.

There can be only one nominee per deposit. But, different deposits can be nominated in favour of different individuals.

6] Exit Option –

All banks that offer the facility of opening a recurring deposit account also provide the option of premature withdrawal with it. The interest payable will be calculated based on how much of the tenure is completed. The bank will also charge a premature withdrawal penalty. Thus, while investing a bank that offers high rate of interest and charges a low fee on premature withdrawal should be chosen.

Terms and conditions about withdrawal, closure and renewal of recurring deposits vary from bank to bank.

  • Premature Withdrawal of Recurring Deposit:

If the account holder withdraws the deposited amount before its maturity, the rate of interest that is received will be the one applicable to the period for which the deposit has remained with the bank. Penalty will also be levied by the bank for premature withdrawal.

Usually, the minimum lock-in period for an RD account is 3 months. If a premature withdrawal is made before this period, the account holder would earn zero interest and only the principal amount that was deposited would be refunded to him/her by the bank.

Besides penalty on interest, the depositor is not eligible for incentives offered by the bank on the recurring deposit.

  • Partial Withdrawal/Loan Facility of Recurring Deposit:

Partial withdrawal of RD is not allowed by banks. Most banks do not allow partial withdrawal. But some banks offer an alternate option in the form of loans or overdraft up to 90% of the deposit balance. This is made available by pledging the balance in recurring deposit account as collateral. The loans or overdrafts are available at the discretion of the bank at a rate fixed by the bank, which varies from time to time. The loan interest rate will typically be more than the interest rate of the recurring deposit account.

  • After the recurring deposit account matures you can choose to close the account and use the returns for your personal needs. Or, you can ask your bank to transfer the amount to a fixed deposit account where it will earn more returns.

RD Premature Withdrawal Penalty

Bank

Deduction in Interest Rates

HDFC Bank

1.00%

Kotak Mahindra Bank

0.50%

State Bank of India

0.50%

Axis bank

1.00%

Federal Bank

1.00%

IDBI Bank

No Penalties

Features of Bank Recurring Deposit.png

Overview of Bank Recurring Deposit

A Bank Recurring Deposit or RD as it is commonly called is a unique term deposit offered by banks. Bank Recurring Deposit refers to the periodic deposit of a fixed sum of money with a bank into a special deposit account, with a specified tenure. The tenure is generally between 6 months and 10 years.

A bank recurring deposit is most commonly used by people with a regular income to set a portion of their income aside each month in order to make a large purchase in the future. When the recurring deposit account is opened, the maturity date and monthly installments are agreed upon between the depositor and the bank. If any installment is missed or delayed, interest payments towards the account are deducted as a penalty. This is generally specified when the account is opened.

The rate of interest on recurring deposit accounts is generally comparable to that of fixed deposit accounts. It is more than interest rates of savings account. The interest rate, once determined, does not change during the tenure. The Reserve Bank of India ensures that strict guidelines are followed.

It is an investment tool which allows those with an ability to make regular deposits earn decent returns on their investment. A bank recurring deposits provides flexibility and ease of use to individuals. Deposit holders can choose to invest a particular amount each month, ensuring that they have enough income for an emergency.

Almost all major banks in India offer a Recurring Deposit Account. At the end of the tenure, the individual will be paid a lump sum amount which includes the original investments and the interest earned on them.

Bank Recurring Deposit Suitablility

  • For:-

Investors who are who are seeking assured returns by investing regularly. It is for investors with medium term goals which are at least 5 years away.

  • Not for:-

Investors who are looking for wealth creation over a long term should not invest in bank recurring deposit. The reason behind this is inflation. The returns from the recurring deposit would not be able to beat inflation over a longer period of duration.

Guaranteed Returns

The principal amount deposited earns interest at regular intervals and the lump sum is handed over to the depositor at the time of maturity. Bank recurring deposit is a safe investment option and the return on investment is mostly guaranteed.

Return’s changes pose risks to existing deposits. For instance, you may have locked-in at a lower interest rate, but due to economic factors, you get higher returns on the deposit later.

The returns are equal to that earned from a bank fixed deposit and are higher than savings bank account.

Given below are the current Interest Rates of Recurring Deposit of Major Banks August 2018.

Bank

Interest rates on Recurring Deposits

For General Individuals

For Senior Citizens

Axis Bank

7% to 7.1%

7% to 7.3%

Citibank

6% to 7%

6.2% to 7.2%

Federal Bank

7%

7.50%

HDFC Bank

6% to 7.25%

6.5% to 7.75%

ICICI Bank

6.6% to 7%

7.1% to 7.5%

IDBI Bank

6% to 6.75%

6.5% to 7.25%

Kotak Mahindra Bank

6.5% to 7.25%

7% to 7.75%

Punjab National Bank

6.25% to 6.75%

6.75% to 7.75%

State Bank of India

6.7% to 6.85%

7.2% to 7.35%

Yes Bank

7.10%

7.60%

Inflation Effect

Bank recurring deposits are not inflation protected. Which means when inflation is higher than the deposit interest rate, the deposit will not earn any real returns. Bank recurring deposits will only give a real rate of return when inflation is lower that deposit interest rate.

Liquid Investment

The bank recurring deposit has a lock-in period. No withdrawals are allowed. But, the bank may allow closing the account before the maturity period. This entails to payment of a penalty for closing the deposit account prematurely.

There is no specific amount that a bank charges on premature withdrawal of your deposit. The interest rate received on the deposit is lesser. The cut-off in interest rate depends upon the duration of the deposit remaining.

Tax Benefits

No tax benefits available on these bank recurring deposits. The interest earned on after the completion of the tenure of the deposit is taxable. It is treated as income while computing the income tax. It is recorded under the head ‘income from other sources’.

Effective from June 1, 2015, TDS is deducted on interest income above Rs. 10,000 at a rate of 10%. This exemption limit of TDS for senior citizens is Rs. 50,000.

Alternative Investment Options

If an investor doesn’t want to invest in bank recurring deposit, it has the following alternatives available, which have almost the same characteristics:-

  • SIP in Debt Mutual Funds
  • Post-Office recurring Deposits
Overview of Bank Recurring Deposit

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