What is a Recurring Deposit?
A recurring deposit, also known as RD, is a term deposit where customers enjoy three-fold benefits of flexibility, guaranteed returns and liquidity. Unlike an FD, investing in an RD gives one the choice to invest monthly and earn interest as per the rates applicable.
Option to invest in a recurring deposit in India is provided by banks as well as other financial institutions. Whereas investing with a private limited company may give higher returns, going for a bank shall always be a safer bet.
Why Choose Recurring Deposit?
Term deposits are considered a low-risk yet profitable investment option by many. Where fixed deposit, a type of term deposit, is a one-time investment, recurring deposit is perfect for those who have a regular flow of income to be invested.
Consider the following pointers to understand the importance of investing in a recurring deposit:
- Flexibility to invest on a monthly basis
Unlike FD, investors can go for regular deposit payment. This is perfect for those who do not have a big corpus right now but can save a decent amount of money regularly.
- Higher rate of interest than savings account
Since RD interest rates are identical to the interest rates offered in fixed deposits, by default investing in an RD fetches higher returns as compared to other bank deposit schemes like savings accounts.
- Short deposit tenure starting from mere 6 months
Investing in a recurring deposit gives one the option to go for shorter duration of lock-in period. This leads to better liquidity and suits those who want to target their short-term goals efficiently.
- Guaranteed returns
Recurring deposit is one of the safest investment options in the market. Since there is no market-linking, so a disturbance in the economy won’t affect investor’s returns. They will earn profit on the rate promised to them at the time of signing up.