Recurring Deposit (RD) is one of the secure investment instrument offered by banks, small finance banks and post offices. Unlike a fixed deposit (FD) account, in which a lump-sum amount is locked in for a defined period against a fixed return, a recurring deposit (RD) account allows the investor to park a fixed amount of funds at regular intervals; for instance, every month. On maturity, the depositor is paid a lump-sum amount which includes his/her periodic investments and the interest income earned on them. Recurring deposit (RD) interest rates, once determined, do not change during the tenure.
Here's a comparison of recurring deposits (RDs) offered by State Bank of India (SBI) and post office:
State Bank of India (SBI) recurring deposit (RD) account:
The minimum amount of monthly installment for a recurring deposit account with SBI is Rs 100, stated SBI on it's website- sbi.co.in. The amount and the number of installments cannot be changed after opening of a RD account. There is no limit on maximum deposit. Interest rates offered on RDs are the same as that on fixed deposit (FD) accounts.
The maturity amount is based on the installment, tenure and type of account selected by the customer. The maturity value of a recurring deposit is rounded off to the nearest rupee and paid after 30 days /one month deposit of last installment or on the expiry of the period, for which the deposit was accepted, whichever is later, noted SBI.
A service charge is levied on recurring deposit accounts paid out on or after the date of maturity, wherein there is default in payment of three or more consecutive installments and the account has not been regularized. A service charge of Rs 10 is levied on such accounts at the time of payment at or after maturity. Premature withdrawal is allowed with SBI's RD account. Interest rates on SBI's RD accounts are the same as those on fixed deposits.
Post office recurring deposit (RD) account:
Post office offers interest at the rate of 7.3 per cent per annum on investment in the five-year recurring deposit (RD) account, according to its official website - indiapost.gov.in. The interest rate on post office RD account is compounded quarterly. A post office recurring deposit (RD) account can be opened by cash as well as cheque. In case of cheque, the date of deposit is the date of presentation of cheque, according to India Post.
The minimum amount required for opening a post office recurring deposit account (RD) is Rs10 per month. While there is no upper limit applicable to the deposit in an RD account, the investor can pick any value in multiples of Rs 5 above Rs. 10, according to the India Post portal. On maturity, a recurring deposit of Rs 10 per month fetches a return of Rs 725.05. The post office five-year RD account can be continued for another five years on a year-to-year basis.
One withdrawal up to 50 per cent of the balance is allowed after one year in case of a post office recurring deposit account. However, it should be repaid in one lump-sum along with interest at the prescribed rate at any time during the currency of the account, according to India Post.