Recurring deposit – Meaning and features

Meaning of Recurring deposit:

Recurring deposit is a type of term deposit made for saving purpose. It provides an investor the flexibility to save a specific amount of money every month in RD account. The amount may vary from a thousand to lakh per month. This amount has to be deposited with a financial institution for a predetermined time period (Usually called Tenure). In India most of the banks provide such kind of deposit schemes to retain their customer’s money with them.

Fixed rate of interest is paid on recurring deposits. A longer tenure fetches higher interest rate than the shorter one.

Features of Recurring deposit:

1) RD can be opened with small amount of money. This way it does not hurt the pocket of an investor.

2) RD schemes provide a stable investment option irrespective of market fluctuations.

3) It provides the flexibility to direct debit the amount from investor’s account. So investors do no have to visit their bank every month for payment.

4) An investor can break RD at any point of time.

5) At maturity, it provides the facility of direct credit the amount of principal as well as interest in customer’s account.