RD offers you a fixed interest on the amount that is invested with specific frequency till the term that has already been predetermined or upon maturity. At the end of the term the amount upon maturity which also would happen to be the invested capital is paid along with the remaining and accumulated interest.
The following are the main features of an RD account
Recurring deposit schemes are made in order to inculcate the habit of savings amongst public; the lowest amount that can be deposited in an RD account varies from one bank to another, and however the amount can be as small as Rs 10.
The minimum period of deposit stars from a meagre six months and the maximum tenure till which a customer can deposit his money is 10 years. The rate of interest is equal to that offered for a fixed deposit and is hence higher than any other savings scheme. Premature and midterm withdrawals are not allowed in a recurring deposit account and this feature is semblative to the feature in fixed deposits. If that happens the depositor has to pay a minimal fine for premature withdrawal. In a recurring deposit account the depositor can let his savings in the account and at the same time can take a loan on the amount by using it as collateral. About 80% to 90% of the amount can be given to the RD account holder. The RD account can be funded from time to time according to the standing instructions which are actually the instructions that have been given by the customer to the bank to credit the RD account every month from his or her savings bank account.
Duration of the RD account
The customers are free to choose the tenure. They can make their calculations and choose the tenure which suits best. In an RD account the compounding of the interest will be done on a quarterly basis. The deposit term begins with a minimum period of 6 months and it goes up to a period of 10 years. However the minimum period for an RD account depends on the banks as well.
Eligibility for holding a Recurring deposit account
Most Indian banks offer resident Indians and Hindu undivided families the opportunity to open an RD with them. What’s more some banks even offer RD schemes for children and on this case the minors too are eligible to open an RD account but of course they do need the supervision of their guardians so that the finances can be taken care of.
These are some of the points to be kept in mind about RD accounts.