Advantages and Disadvantages of a Recurring Deposit

• Step 2: Visit the Nearest Branch

Then, locate the nearest branch of the bank, NBFC or Post Office and pay a visit to the branch office in person. 

• Step 3: Fill out the Account Opening Form

Once you’re at the branch, request an official for the RD account opening form and fill in the details of your RD account. You can enter the deposit amount, the tenor and other such details here.

• Step 4: Submit the Form and the KYC Documents 

After filling in the form completely, attach any KYC documents that may be required, along with a cheque or DD for the first deposit instalment, and submit the form at the branch. 

Alternatively, if you have an account with the bank or NBFC, you can directly log in to the internet banking portal and open an RD online. 

Keep in mind that before you start investing, you should consider the key advantages and disadvantages of recurring deposit.

• You are an Indian resident

• You can be a citizen above 60 years

• You are a minor with a guardian

• You are a non-resident Indian (NRI)

2. Option to Avail a Loan 

Many issuers give you the option to avail a loan against your RD. Typically, the maximum amount of loan that you can avail is up to 90% of your investment. This is one of the major advantages of recurring deposits, as it enables you to get quick access to funds.

3. Disciplined Savings

From an early age and stage, you can instil the habit of saving in yourself or your children by including a recurring deposit in your investment portfolio. This is because RDs require monthly investments and help you develop the habit of saving systematically.

4. Low Minimum Investment Amount 

Even someone with the most modest income can open a recurring deposit. While the minimum amount can vary from one institution to the other, RD accounts can generally be opened with an amount as low as ₹100 a month. 

5. Flexible Tenor

Among the many advantages of recurring deposits is that you can easily save for your short-term goals that may be coming up in the next 6 to 12 months.

6. No Limit on the Number of RDs

As an account holder, you have the option of opening any number of RDs. There is no limit on the number of recurring deposit accounts you can hold. 

7. High Liquidity

In case of any emergency, you can easily and quickly withdraw the money that you have saved up. Just bear in mind that you would have to pay a small penalty for a pre-withdrawal. That said, it is typically not advisable to withdraw unless absolutely necessary.

8. Low-Risk Savings

Unlike other investment products such as stocks, mutual funds etc., recurring deposits are a very safe and risk-free option. With rates not affected by market fluctuation, you can rest assured that you will receive returns at the end of your investment tenor.

9.  Lucrative returns

This is one of the major advantages of a recurring deposit account. The interest rates on recurring deposits can go up to 8.50% p.a., depending on investment terms and issuer. These rates directly influence your returns and can help ensure that you earn great returns and grow your wealth.

10. Achieve financial goals 

At the base of any investment is accumulating wealth to fund a certain goal, long-term or short-term. One of the major advantages of recurring deposits is that with lucrative returns and flexible tenors, you can work toward any goals realistically. 

11. Digital Process

With digitisation, investing in an RD can also be done online. You can also manage it entirely through digital facilities. Most issuers have an app that allows you to track your investment anywhere and anytime, making it one of the major advantages of recurring deposits.

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