Not all of us can put bulk amounts into our investments, can we? But why is that? That is because the majority of us have a corporate job or a day job and get paid on a monthly basis – which means a little money every month.
For instance, if you want to invest Rs. 5,00,000 lakhs in a fixed deposit, your monthly salary is Rs. 50,000. How are you going to make it to fund the fixed deposit? Well, even if you save Rs. 10,000 each month, you would have to wait months in order to invest that in an FD. That is a long time to wait for your monthly to grow in any possible way.
But is there another way you could work this out? Fortunately, to your luck, there is. You can invest that Rs. 10,000 in a recurring deposit. Wait, wondering what a recurring deposit is.
Here we are – to explain it all.
What is the Meaning of a Recurring Deposit Account?
The recurring deposit account is a type of bank or post office account where a depositor makes regular monthly deposits of a predetermined amount of money (generally ranging from one year to five years). This format is intended for the persons who want to make a fixed monthly payment with the intention of receiving a lump sum after a few years.
The Recurring Deposit plan’s tiny monthly contributions allow the user to accumulate a sizable amount at maturity. This type of deposit scheme’s interest rate is calculable on a quarterly compounded basis.
An ordinary fixed deposit assures that a person allows money and can withdraw this amount within a specific time frame. You are unable to touch the amount of money or perhaps add to it in the interim. The repeating deposit follows a similar procedure. The primary difference in this type of program is that each month, instead of making a large deposit, you should deposit a specific amount into your account that you chose when you opened your RD account.
This sum can be negligible and won’t leave a big hole in your wallet. And when the loan matures, you will have a sizable surplus over the principal plus interest.
Want an RD Account? Here’s How to Have One
You can start a Recurring Deposit account by going to any bank or post office, filling up the necessary paperwork, and paying the first month’s payment together with other required documents, such as a PAN card and evidence of residency.
A recurring deposit can be opened for as little as six months or in increments of 3 months, with a maximum term of 10 years. The interest rates offered for recurring deposits are similar to those offered for fixed deposits. Similar to India Post, an additional 0.5% rate of interest is given to older citizens, and some banks additionally offer a grace period of roughly five days.
Although have you heard about the flexible recurring deposit? If you have not, this is the right place to get to know it.
What is a Flexible Recurring Deposit Account?
Depositors can invest lump sums as and when they become available with a Flexi Recurring Deposit, which gives simplicity and total flexibility. A Flexi RD has two parts: the flexible amount, which can vary with each monthly installment depending on the available money, and the core amount, which is the amount that the account holder contributes when the RD is opened. For a specific tenure, a core amount must be used to open each Flexi Recurring Deposit.
Depending on the bank where the RD is being held, this sum varies. With a cap on the amount to be invested, the variable portion of the recurring contribution can be increased in certain multiples.
While the flexible portion has an interest rate that is effective as of the deposit date, the core amount is subject to the relevant rates for the duration of the recurring deposit. The essential amount must be deposited by the deadline in order to avoid a fine from the bank.
No penalties will be assessed if the flexible amount is invested at any point throughout the month. Flexi Recurring Deposit plans do not incur early closure fees and can be closed at any time.
Some of the Famous Flexible RD Accounts
There are renowned banks out there that are willing to offer you this, and they are:
a) ICICI Bank ( iWish Flexi RD Plan)
One of the finest yields is provided by the ICICI Bank’s iWish Flexible Recurring Deposit, which has interest rates between 7.00% and 7.50% for terms ranging from 6 months to 10 years. Customers are not required to make deposits every month and may deposit any amount at any time during the term. Several deposits may be made in a single month. For iWish accounts canceled before the duration is up, ICICI Bank does not impose a pre-closure penalty.
When opening an iWish flexible RD account, customers can establish a goal amount and choose how much they should deposit each month to get there. To raise the necessary funds, family members and friends can make contributions.
b) Punjab National Bank (Swecha Jama Yojna)
The PnbSwechha Jama Yojna scheme requires a minimum deposit of Rs. 100 and can be applied for by a single applicant or as a joint account. Depositors have tenure options ranging from 6 months to 120 months. PNB stipulates that the monthly sum must not exceed ten times the core sum. Customers are not subject to any fees for late deposits or early termination of recurring deposits.
Under the supervision of a guardian, minors are also permitted to open a Flexi RD account through the PnbSwechha Jama Yojna. On a PnbSwechha Jama Yojna account that already exists, PNB also grants loans or overdrafts.
c) State Bank of India (Flexi Deposit Plan)
With the SBI Flexi Deposit program, a client has the freedom to select the annual deposit amount. This sum must be within the bank’s established minimum and maximum limitations. The deposit amount can be increased by multiples of Rs. 500 up to a maximum of Rs. 50,000. The minimum deposit amount is Rs. 5000. Customers are permitted to deposit any number of times during the year. A fee of Rs. Fifty will be assessed by SBI if there is any payment default. The deposit tenure might range from 5 years to up to 7 years, and the interest rate offered will be compounded on a quarterly basis.
Debits from savings accounts, current accounts, and other designated accounts can be used to pay for an SBI Flexi Deposit. The SBI Flexi Deposit scheme offers advantageous interest rates to senior folks as well.
Conclusion
This is literally – just the tip of the iceberg. But, you would like to know that there are a lot more banks that are willing to offer you this scheme – and you would have to enjoy it.
