RD is a good option for those who do not want to take risk at all.
Recurring deposits (RD or RD) are a popular method of saving among investors. It is considered a good alternative to fixed deposits and long-term post office schemes. In a recurring deposit, one has to deposit a fixed amount every month for a fixed period.
At the end of the period, the maturity amount is given back to the person. This includes the principal amount of the investment and the interest earned on it. There are also recurring deposits in which different amounts can be deposited. However, in most cases a fixed amount is deposited every month.
How is RD helpful?
RD is helpful when one does not have a lump sum to save for short-term goals. The reason is that it helps in saving some amount every month.
RD is a good option for investors who want assured returns. It can be invested to meet the goals of one year.
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Recurring deposits can be opened in a bank or post office. The minimum amount of investment may vary from bank to bank. Usually it is 500 rupees or 1,000 rupees.
The period of recurring deposit is usually from six months to 10 years. In some banks, the minimum period for online RD can be 12 months. The minimum investment amount for post office RD is up to Rs 10 per month. But, one has to invest for five years.
Online RD account opening facility
You can open an online RD account by logging in with your Internet banking username and password. Usually online RDs can only be opened between 8 am and 8 pm.
The name and mode of operation and branch of the newly generated RD account will be like the savings account from which money will go to the RD account.
On submitting a request for opening a recurring deposit account, you will be asked for how much amount you want to deposit in the account. Some banks may allow RD installments to be deposited offline. However, the first installment is required to be submitted online.
How to open RD if you have an account with SBI?
1.After logging into NetBanking, click on ‘E-RD (RD) / E-SBI Flexi Deposit’ under Fixed Deposit.
2.If there are more than one account in the bank, all will be seen. That means all savings and current accounts will be visible.
All Bank Recurring deposits (RD) Released New Interest Rates 2020
3.Select the account with which to link the RD account.
4.Choose the monthly installment and duration. The interest rate will be determined from the period. This is usually the same as the fixed deposit rate. Senior citizens may get additional interest.
5.If eligible, click on Senior Citizen option.
6.Choose the option to convert the maturity amount to a savings account or convert the maturity amount to a fixed deposit.
7.After reading all the terms, click on the ‘Terms and Conditions’ section.
8.On the next page, fields about the name, method of holding and nomination will be displayed.
9.RD will be created by clicking on Confirm button. You will get the reference number and E-RD account number.
10.If you want, you can view, print and download the E-RD details.
11.Apart from this, if you want to give any standing instruction (SI), you can do it online.
Premature Withdrawal
If you want, you can cancel the previously installed standing instruction via the Internet. After this, RD can be closed before maturity. Only RD accounts that were opened online can be closed online.
Deposit 1 thousand rupees every month in RD, a fund of 70 thousand rupees will be ready in 5 years
The interest will be calculated for the period when the deposit was in the bank when the deposit is withdrawn before maturity.
How to know RD’s maturity value
Many banks have given the facility of RD calculator to tell how much you will be able to save through investing in RD.
With the help of the formula, you can also withdraw this amount yourself. The formula is:
A = P * (1 + R / N) ^ (Nt)
Here A is the amount to be received on maturity. P is the amount deposited in the recurring deposit. N is the compounding frequency. R is the interest rate. t is period.
On making a recurring deposit of Rs 5,000 for 12 months at the rate of 8%, this amount of maturity will be made:
A = P * (1 + R / N) ^ (Nt)
= 5000 * (1 + .0825 / 4) ^ ( 4 * 12/12) = 5425.44
= 5000 * (1 + .0825 / 4) ^ (4 * 11/12) = 5388.64
…..
= 5000 * (1 + .0825 / 4) ^ (4 * 1 / 12) = 5034.14
Total Maturity Value (Series Sum) = Rs 62730.85
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