Recurring Deposits – Options & Interest Rates

Recurring Deposit – is most convenient option for savers who want to to save regularly from their monthly income.This is the most simple way of saving and useful way of long term capital accumulation.

Safety is the important aspect of recurring deposits and interest rates are generally fixed with few selected exceptions.

Recurring Deposit Options:

One can start recurring deposits at –

• Indian Posts – High Safety.
• Banks – High Safety.
• Private Institutions – Medium Safety but high interest rates.

Recurring Deposit Interest Rates as in August 2012 –

Indian Posts : 8.40%.compounded annually.[for 60 months]

Banks RD Interest Rates:Selected rates are as shown below

Bank Name	RD Interest Rate-Compounded Quarterly.
IDBI Bank	9%
SBI	8.75%
Bank OfBaroda	9%
ICICI Bank	8.50
HDFC Bank	9.25

Recurring Deposits from Private Institutions:

Few financial institutions like HDFC or DHFL have RD schemes with following interest rates –

Name	Interest Rates
HDFC Systematic Saving Plan	9.25%
DHFL Small Savings Scheme	10.50%

Illustration Of Recurring Deposits:

For illustration purpose, consider Recurring deposit made at 9% rate with Quarterly compounding and tenure of 60 months.

Monthly Invested – Rs.3000/-

Term – 60 Months.

• Total Invested – Rs.1,80,000/-
• Maturity Value – Rs.2,27,558/-.

Then Cumulative flow of recurring deposit will be like this as shown below:

In actual,, Interest will be reflected in your account quarterly/half yearly as system opted by your bank,, but final numbers will be same.

One should note that for premature withdrawal, one may get lower interest rate and lower interest.Few banks like Bank Of India or financial institites like HDFC use variable rate method where rate is linked to the fixed deposit rate and changes accordingly.So interest accrued will be changed accordingly.

Few banks allow to open RD account online,just check all terms like fine on premature withdrawal , fine on missed installment ,auto closure of account etc.