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Open RD Account

RD Account Opening Criteria

Last Updated 26th Jan 2021

Interest Rate 2.50% to 8.50%
Tenure 6 months to 60 months
Minimum Deposit Amount ₹ 10
Eligibility Indian citizens, Non-resident Indians, Adult Citizens, Minors, Government organisations, Private companies, Sole Proprietorship
Documents KYC documents (identity proof, address proof, etc.)
Partial Withdrawal Not Allowed
Premature Closure Allowed (Charges Applicable)
RD Calculator

What is a Recurring Deposit?

A recurring deposit or an RD account is a deposit facility offered by various banks and NBFCs with the flexibility to make monthly deposits and get lucrative returns. Once you have opened an RD account in a bank, you can start investing small amounts throughout the tenure.

RD allows you to multiply the investments faster than savings deposits without putting the burden of a one-time lump sum deposit. With RD, depositors get flexibility in terms of payment as well as in terms of tenure. You can select a short-term or long-term tenure anywhere between 90 to 10. At the time of maturity, you will then receive the entire amount invested along with the accumulated interest. It is, thus, the best savings option for those with small earnings. It is important to know how to open RD account to avail the benefits of investing in it.

Steps to open Recurring Deposit Account

Recurring deposits can be opened at any bank and other financial institutions either online or through an offline procedure. To know how to open the RD account, read on.

Online procedure

You can open an RD account online through the following steps.

  • Activate net banking facility on your bank account.
  • Once net banking is activated, visit the bank’s website and log in to your account with the registered username and password.
  • Choose the option available for opening an RD account.
  • Fill in the application form and select required details such as Monthly deposit amount. Tenure, etc.
  • Once the application has been submitted successfully, and the account has been opened, start investing.

After submitting these details, link your savings account with your RD account for easy transfer of funds to the RD every month. Open rd account online to start availing its benefits in a hassle-free manner.

Offline procedure

If you want to open recurring deposits offline, follow the steps given below.

  • Visit the nearest branch of the bank you chose to open an RD account in.
  • Fill in their RD application form with the details asked to provide.
  • Attach the required KYC documents with the form and submit it to the bank authorities.
  • Deposit the chosen amount for monthly investments at the bank by cash, cheque or demand draft.

On deposition, your recurring deposit account will be opened. Make the monthly deposits on time and wait for lucrative returns at the time of maturity.

Benefits of Opening Recurring Deposit Account

Recurring deposit is a good investment scheme for those who want substantial returns on small investments. You can earn high interest similar to that in FD without having to pay the total investment amount at a time. Open recurring deposit to avail the following benefits.

  • Flexibility of investment : Recurring deposits allow you to make monthly deposits throughout the tenure as per your convenience. You can select the amount that you can afford and continue to save your money without overpowering your monthly expenses.
  • Guaranteed returns : Recurring deposit is a risk-free investment which gives guaranteed returns on the invested amount being multiplied with interest throughout the deposit tenure. The interest rates are not subject to market inflations, and thus, Investors will earn interest at the same rate promised while opening the account.
  • High-interest rate : Recurring deposits offer higher interest rates than savings accounts. Open rd account to earn better interest on your investments.
  • Flexible deposit tenure : Banks allow opening recurring deposits for a varying range of tenures including starting from tenures of 6 months and going up to 10 years. You can select a tenure based on your financial goals.
  • Easy withdrawal : The recurring deposit can be dissolved anytime by withdrawing the balance amount. It, thus, ensures liquidity of cash at the time of need. Banks, however, might charge a nominal foreclosure fee for closing the deposit before maturity.
  • Loan against Recurring Deposit : Open rd account to get a loan against your recurring deposit balance. You can borrow a loan of up to 95% of the total deposit depending on the bank you invested in.

Eligibility to Open a Recurring Deposit Account

You need to meet certain eligibility criteria to qualify for investing in a recurring deposit. The criteria may differ from one bank to another. However, the common criteria are listed below.

  • Any adult individual is eligible.
  • Minors above ten years of age are eligible (name proof is must in such a case).
  • Minors equal to or below 10 years are eligible under the guardianship of natural or legal guardians.
  • Any company, proprietorship, commercial organisation, etc. can open an RD.
  • Any government organisation is eligible to have RD.

Illustration

If you invest in RD, the amount you receive at the time of maturity depends on a number of factors. The maturity amount depends on the total amount invested, the tenure of investment and the interest rate applicable for the tenure. An illustration of how the recurring deposit works will help you get a clear idea about such an investment scheme.

Suppose you have invested ₹ 50,000 throughout the deposit tenure at an interest rate of 5% for 5 years. The formula used to calculate the compound interest on RD is:

I= P(1+r/n)^nt
Where,
I= Interest earned
P= Principal amount
r= Rate of Interest
n= compounding frequency in a year
t= Years of investment.
If your bank compounds interest on a quarterly basis, the total interest earned at the end of 5 years will be,
₹ 50,000 (1+5/4)^4*5
₹ 64,07,226.56
The amount received at the time of maturity will be
= Principal amount + total interest earned
= ₹ 50,000 + ₹ 64,07,226.56
= ₹ 64,57,226.56

FAQs

How can I open a Recurring Deposit account?

You can open a Recurring Deposit account either online or through an offline process. You need to fill up the given RD registration form with the necessary details and submit the required documents for verification. Then, you have to deposit the amount you choose to invest every month to finish the procedure.

Can we open Recurring Deposits online?

Yes, you can open Recurring Deposits online following these simple steps:

  • Visit your bank’s official website and select the option to open RD.
  • Fill in the RD application form with the details required, including the number of monthly deposits, deposit tenure, etc.
  • Submit the form and link your savings account to your RD account for transferring the monthly payments to the RD.
  • Once the first monthly deposit is made, your RD account will be opened.

How many RD can be opened?

You can open any number of recurring deposits you want. Officially, there is no restriction on the number of RD one can hold at a time. However, remember that as per the Central Government rule, even the interest earned on RD is taxable. So, if you earn more than₹ 10,000 as interest on your multiple RDs, the tax will be deducted at the source, which can be avoided by submitting 15G, 15H forms accordingly.

Can I open an RD without a bank account?

Some banks allow customers to open recurring deposits without having a savings bank account with the bank. However, if the bank allows you to invest in a recurring deposit without a bank account, you have to submit your KYC or Know Your Customer documents such as id proof, address proof, etc. while applying for opening the account.

How can I invest in RD?

Investing in RD is a safe way to invest your savings. You can start investing in RD by opening an RD account at your chosen bank. You have to deposit a predetermined amount every month for a chosen tenure. Interest will be accrued as per the interest rate offered by your bank on term deposits and according to the deposit tenure. At the end of the RD tenure, you will receive the total deposit along with interest earned as returns.

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