A Recurring Deposit (RD) is a special type of deposit that works similar to a Fixed Deposit (FD) in which monthly or quarterly deposits are made that is fixed for a specific period of time. This is a great way of saving a considerable amount of money for people who do not have a big chunk of money at their disposal to invest in FD or in other types of investment plans.
A good example of an RD explains it clearly – Ram wants to invest a sum of Rs. 50,000 in an FD but he does not have the whole amount in-hand at the moment. In this situation, Ram decides to opt for an RD and deposit a sum of Rs. 5,000 every month for 10 months. This way he can successfully save Rs. 50,000 and even get interest on it. The RD was designed to benefit the middle-class and lower sections of society who usually cannot invest in an FD outright or who prefer to save in small amounts first to build up a corpus. It gives them an opportunity to build good savings for future needs. However, the scheme is also an ideal short-term investment option for people who want to park their money for a short period rather than putting it aside without being able to access it in any way.