When it comes to choosing savings instruments, there are plenty of choices available in the market and to no doubt, recurring deposit plan is among the flagship instruments that have remained quite popular among the salaried individuals. It is offered in association with an IRDAI approved insurance company. Those confused with the right investment instrument, FAQ about recurring deposit could help you clear the air and invest in the right instrument with added benefits.
What is recurring deposit?
Recurring deposit is a term deposit where an investor decides to invest a fixed amount into the RD accounts at a regular interval. The account offers high rate of return that could range from 5.25% to 8% for a period of one year or more. The account acts as both savings-cum-investment instruments that assure high returns in a given period of time.
Can minor invest in RD account?
Basically, most of the investment instruments have special norms regarding the minors, but recurring deposit account is not available for the minors. The account is directly linked to the investor’s salary account and thus, an account cannot be opened in the name of a minor.
What is the minimum deposit amount?
Unlike other investment instruments, RD account doesn’t require lump sum investment; in fact, an investor could start with minimum deposit of just Rs.500. Although with most banks and financial institutions, the minimum deposit could be as low as Rs.100.
What is the tenure of RD account?
An investor has the flexibility to choose the tenure for minimum of 6 months that can be extended further for maximum up to 10 years. RDs offer its investors a power to define the length of the term.
Is there any lock-in period?
No, most recurring deposit accounts don’t have any lock-in period and the investor can anytime withdraw the investment. However, the lock-in period norms could vary from bank to bank and thus, it is best to first check with the bank’s FAQ about recurring deposit to avoid last-minute mess.
What if I failed to make payment of RD installments?
Recurring deposit is an investment where an investor makes regular installment payment and if he or she fails to make the payment of recurring deposit on time, then the bank could charge a penalty. If the investors fail to pay the installments for consecutive months, then the bank could decide to permanently disable the RD account.
Can I convert my RD account to FD account?
Yes, an investor can convert their RD account to FD account, but only upon maturity of the former account.