Recurring deposit: Which bank is giving a higher return on Recurring deposits, and where to invest better?

After the Covid-19 pandemic, people are adopting the method of investing to secure their future. Banks are also launching new schemes for investments. 

What is Recurring deposit?

A Recurring Deposit, commonly known as RD, is a unique term-deposit that is offered by Indian Banks. It is an investment tool that allows people to make regular deposits and earn decent returns on the investment.

Recurring deposit
Recurring deposit

In the Recurring deposit scheme, you can get good profits by investing. The main feature of a Recurring deposit scheme is that you can save and earn interest with small contributions at regular intervals.

The maturity amount for a recurring deposit is the sum of the principal and interest generated over the investment period. You will get compound interest every quarter. According to the HDFC Bank website, the recurring deposit is calculated using the compound interest formula. Savings have to be deposited in the account every month. Banks will pay interest on your savings on a quarterly compounding basis.

Here is a list of interest rates on RDs from some of the leading banks, so you can assess which one might be better for investing.

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ICICI Bank Recurring Deposit Interest Rate

The maturity period of this bank is from 6 months to 10 years. You can open an account at any time in this bank. The interest rate for ordinary people ranges from 3.50 to 5.60. Whereas for senior citizens, the interest rate is from 4.0 to 6.35.

SBI Recurring Deposit Interest Rate

The interest rate on RD offered by SBI Bank to RD account holders is applicable on fixed deposits for public and senior citizens. Whose deposit period is minimum – 12 months, maximum – 120 months. In this, the minimum deposit amount that you can deposit is Rs 100 per month in multiples of 10. The interest rate on this is 2.90 for a minimum of 7 to 45 days and 5.50, for a maximum of 5 to 10 years. Whereas for senior citizens it is given from 3.40 to 6.30.

HDFC RD Interest Rate

The interest rate in HDFC Bank on RD is 3.50 percent for the public for 6 months. The same 5.60 percent interest is given on a maximum of 120 months. On the other hand, senior citizens are given interest from 4 percent to 6.35 percent.

Penalty for non-payment of monthly installments

SBI customers will have to pay Rs 1.50 per Rs 100 every month for an account with a maturity period of 5 years. Rs 2.00 per Rs.100 per month is for accounts with a maturity period of more than 5 years. In the case of SBI RD, if an RD customer misses six consecutive installments, the account will be closed early, and the balance amount will be paid to the account holder. According to the ICICI Bank website, a penalty of Rs 12 per Rs 1000 is levied on monthly interest for all delayed installments.

Is interest earned on recurring deposits taxable?

Yes, the interest earned recurring deposit is taxable.

What is the minimum tenure for Recurring deposits?

The minimum tenure for Recurring Deposit (RD) differs from bank to bank. Most banks offer RD schemes for a minimum tenure of 6 months or 12 months.

Is RD better than FD?

The interest amount earned at the end of maturity of a Fixed Deposit is higher than the interest earned on an RD. The interest amount earned is lesser than the interest earned on an FD. The interest earned on an RD is paid on maturity along with the capital amount.

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