Long Term Recurring Deposit (RD)

For example, if you are saving for your child's higher education or a related expense, you can calculate an approximate amount you will require and plan your recurring deposit accordingly. As you would also have more immediate expenses, selecting a long term recurring deposit would be a good idea as you can start saving a small amount from the beginning.

You can select a tenure up to a maximum of 10 years, at the end of which you will receive not only the principal but also the accrued interest, making for a significant amount.

Tenure and Minimum Amount for Long-Term Recurring Deposit (RD)

• A long term recurring deposit has a maximum tenure of 10 years as per banking guidelines.

• A long term recurring deposit is usually over 5 years, compared to the regular recurring deposits, which range from 3-5 years.

• A long term RD keeps your money locked for the duration of the deposit, which is why you should plan wisely since the penalties associated with a premature withdrawal are quite steep.

• Another point to keep in mind is ensuring you have sufficient funds in your account, as the predetermined amount will be deducted on a fixed day each month. In case of fund shortage, most bank levy a late payment charge which varies.

• Different banks have different rates regarding the minimum deposit amount for a long term recurring deposit.

For example, some banks have a minimum deposit amount of Rs.10, whereas it is Rs.100 for others.

All banks stipulate that amounts have to be in multiples of Rs.100 over and above the minimum deposit.

Eligibility Criteria for Long-Term Recurring Deposits

The following requirements must be met to open an RD account at a bank: 

• An RD account can be opened by anyone 

• Under the supervision of a natural or legal guardian, minors under the age of ten may open an RD account 

• An RD account can be opened by any corporation, sole proprietorship, or commercial organization 

• An RD account can be opened by any government agency. 

Documents Required to Open an RD Account 

To open an RD account with the bank of your choice, you will require: 

• An opening form for a recurring deposit account 

• Two passport-sized pictures 

• A driver's license, utility bills, an Aadhaar card, a voter ID, or a PAN card are examples of address evidence 

• Aadhaar cards, voter IDs, driver's licenses, and PAN cards are examples of identity verification. 

Features of Recurring Deposit 

Here are some basic features of recurring deposits: 

• Minimum Deposit Amount: Each bank has a different minimum deposit amount; some only require deposits of Rs. 100 

• Tenure Options: Investors have flexibility in their investing options by choosing a deposit duration that ranges from six months to ten years 

• Standing Instructions for Deposits: To frequently fund your RD account, you can set up automated transfers from your current or savings account 

• Withdrawal Restrictions: Most banks do not enable premature or mid-term withdrawals. Some, though, would permit it with the appropriate consequences 

• Competitive Interest Rates: The interest rates for recurring deposits are usually comparable to those of fixed deposits, providing returns that are higher than those of standard savings accounts 

• Loan Facility: Investors can take loans against their deposits, often up to 80%-90% of the deposit amount, although this varies per lender. 

A good credit score can help you secure lower interest rates on loans and credit cards.

Get Free Credit Score