Top 10 Facts & Benefits of Recurring Deposits in India
A Recurring Deposit (RD) account has always been popular. It has retained its popularity despite many new-age schemes. It is similar to FD but does not demand a lump sum amount for deposition. As the name suggests, recurring deposit involves depositing money annually for a determined period. Later, people can benefit from the interest earned. It is popular for the convenience with which people can invest. RD is especially preferred by people not ready to face the consequences of being an irregular investor. There are many benefits of RD, and a few are listed below to make a future investor understand its value.
What makes an RD differ from FD?
The recurring deposit has a lot of common features with the fixed deposit. The key difference is that FD involves a huge investment upfront, and the interest will be gained over time. Whereas in RD, the investor has the advantage of initiating the investment with a small amount and can increase the amount by month at their convenience. The interest profit will be high in FD as the money invested is huge. But this edge for FD recognizes the numerous benefits of RD.
How to create an RD account?
The procedure is the same as the other mutual fund investment options. Reach out to the nearby bank. Fill out a recurring depositing account opening form. Submit the details with an added cheque for the first instalment. Before opening an account, decide the interest rate, the instalment’s tenure, and the amount. Carry all the relevant proof of details requested by the bank. The RD account can also be opened via a post office at one’s convenience.
How does RD benefit an investor?
As an investor, anyone will try to have control over their money. This is much more possible with recurring deposits than with other high-risk investment policies. First things first, starting the investment with very low money is probable. The initial amount may vary with the choice of bank. This lets people from all financial backgrounds start their investment journey. Since there is low to no loss, it encourages newbie investors who are sceptical about taking the first step. The investor can also determine the investment duration depending on their goal. The assurance in return is what makes this scheme better than other schemes. So, an investor can strategize a plan and achieve their goalkeeping the benefits of RD in mind.
What makes the RD stand out?
- High-Interest value:
The recurring deposit has a high investment return value compared to the mutual fund SIPs. This is because SIPs, other mutual funds and stocks are highly prone to risk and market volatility. The interest rate for an RD is fixed at the beginning of the investment; thus, returns cannot fluctuate.
- Low risk:
One of the noticeable benefits of RD is it involves low risk. It is perceived as a safe form of investing money. It is not subjected to any variation in the share or stock market.
- Flexibility:
The amount involved in an RD is flexible to the investor’s convenience. They can increase or decrease the money intended to invest at any specific period, and this will not have any legal or fineable backlash.
- Easy payment:
There is no obligation when it comes to investing in an RD. It does not demand in-person investment nor rules to be followed for how money is transferred. It can be transferred from either a savings or a current account without breaking a sweat.
- Achievable short-term goals:
Recurring deposits are the go-to investment scheme to attain any short-term goal. It is flexible for both long-term and small-term goals, unlike certain mutual funds where the profit earned via interest is visible only after a decade. This crucial benefit of RD is what makes it famous among the common people.
- Minimal initial investment:
The initial investment can go as low as Rs.100 in some banks. This low minimal investment invites a large number of investors across all ages despite a poor financial situation. Similarly, the minimum tenure starts from 6 months to one year. Thus, one need not fret about their future financial situation.
- Makes saving easy:
With all the above-mentioned points, even the worst spendthrift could be persuaded into saving money. Knowing the money is secured yet yielding a profit in the form of an interest rate is a good enough reason to save the money.
- Online mode of investment:
The only difficulty ever faced by the public with RD or any other form of investment for decades is the long-standing queue in every bank. This is now the case with the prevailing digital advancements. Money can be invested anytime, anywhere, using the online facilities of the banks.
- The wide age range for investors:
RD breaks the stereotype posed by other schemes of investing only after a certain age. In recurring deposits, the minimum age goes down to as low as 10. Kids can open an account with the support of parents or guardians. And adults over 18 are free to open a recurring deposit account jointly or on their own.
- A key benefit of RD is availing of loans:
The option to apply for a loan against your RD account makes it an irresistible way of investment. This is possible after an RD account is activated and receives 12 months of active investment. Later, the loan can also be paid in instalments depending on the convenience of the person. This is considered one of the notable benefits of RD.
Conclusion:
Recurring Deposit is one of the most loved forms of investment among the public. Upon reading the above article on the advantages of an RD, one can move forward to initiate their investing journey. It is the low-risk mode for an individual to acquaint themselves with the field of investment before starting high-risk investments.