What I do not understand is what is really meant by the term "recurring"? Also why is the minimum time limit between recurring and fixed deposit so different (min :6 months and min :7days) respectively?
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1I googled "india recurring deposit", and the first hit was a clear explanation.– RonJohnAug 25, 2021 at 2:28
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Even an even better search string is "india what is a recurring deposit".– RonJohnAug 25, 2021 at 2:29
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2 Answers
A recurring deposit (RD) is an instrument where you deposit some money, at a specified frequency. On the target date, you receive the total amount you deposited + interest. The interest rate for the RD is decided and locked on the date you open the RD. This means you are immune to any fluctuations in interest rates over the period of the RD.
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1@RonJohn , I guess the way to put it is that a RD is an instrument which can be used to create\manage a sinking fund. The "Contractual obligation" depends on the specific bank, some banks make it easy to skip a contribution without any penalty, others dont.– AkashAug 27, 2021 at 4:15
A recurring deposit, also known as an RD, is a term deposit that allows customers to invest an amount of their choice each month and save money easily. With terms ranging from 6 months to 10 months, most banks and NBFCs offer recurring deposit accounts.
However, it is critical to understand the distinction between RDs and Fixed Deposits/FDs. RDs are generally adaptable. An RD account holder can choose to invest a fixed amount each month while earning a reasonable rate of return. RDs are an excellent saving-and-investment vehicle.
Most major banks in India offer Recurring Deposit Accounts with terms ranging from 6 months to 10 years, with the option for individuals to choose a term based on their needs. However, once determined, the interest rate does not change during the tenure; and upon maturity, the individual will be paid a lumpsum amount that includes both the regular investments and the interest earned.
