Recurring Deposit or RD as it is referred to is an investment procedure with relatively low risk and intermediate profit margin. An investor is at liberty to choose both the tenure of the investment and the amount of money he or she wants to deposit. This is in a similar line to a monthly/ savings scheme and is available with most banks and several, multiple NBFCs.
A ‘Recurring Deposit’, the name suggests, is another popular, risk adverse investment product, offered by both the regular scheduled commercial banks, and other NBFCs, or non-scheduled monetary institutions. In this investment option, money is put into the account regularly and can be a fixed amount while the investment period can be from six months to ten years.
Thus, RDs are beneficial to persons who wish to saves money consistently each month and for the achievement of short-term financial objectives. Of particular interest is the fact that the interest rates on RDs stand higher than those of ordinary savings accounts thus making it even more appealing to investors. Further, RD interest rates are very much comparable with the possible return which can be made through Fixed Deposits (FDs).
How does a RD functions?
This is a specific amount of money that an investor deposits every month throughout the entire term that has been agreed on in the RD. The interest for a RD is calculated at the end if fixed term quarter.
What to check before investing in a RD?
Below is a list of some of the essential points that need to consider before opening RD account.
Term period: For a RD one selects the term depending on the wishes and since it is not possible to go for early withdrawal of an RD before the set term. As for terms of RDs, these can roughly be classified in three categories. The first is short term RDs which are RDs that can take a period of 6 months to one year. The second is a medium term which ranges from 1 year and up to 5 years. The third is long term which has a duration of five years to ten years.
Interest rate: This is the second factor that you should track you need to know how much you are going to earn in case you invest a certain sum for the specific amount of time. The interest rates applied in lending that is extended through the various banks and NBFCs vary.
Withdrawing before term ends: All the banks have a provision for premature withdrawal but the penalty for early withdrawal is different in each bank. Hence, pick an institution that levies low penalty so as not to spend too much in cases where you have to deregister early.
If you are still not sure if Recurring Deposits are the right investment option for you right now, talk to our experts at Policyinserv, and start building your wealth.
