Recurring Deposits

wealthymatters.comA Recurring Deposit(RD) is a type of term deposit account opened by a person/persons with a bank or a post office wherein the investor or investors deposit a fixed amount of money every month for a fixed tenure . This scheme is meant for investors who want to deposit a fixed amount every month, in order to get a lump sum at the end of the tenure. The interest on RDs normally offered by banks is one percent below Fixed  Deposit(FD) rates compounded quarterly.Often there is nothing extra by way of  interest offered for senior citizens.Otherwise the rules for operating a RD account are the same as that for a FD account.The PO offers a fixed 7.5% interest compounded quarterly for a 5 year term.

RDs are great for people to develop the savings habit.It is especially useful to teach kids to save especially the Post Office Recurring Deposit (PORD) which has a minimum deposit of 10 rupees per month.Often banks package RDs as schemes to become or to make your child a lakhpati,millionaire etc or as schemes to build the down-payment on a house or vehicle.  Read more of this post


Bank Fixed Deposits

wealthymatters.comA bank FD is a savings instrument where you deposit an amount with the bank for a fixed duration.You earn a fixed rate of interest on this investment. The interest rate is fixed at the time of the investment – even if interest rates change during the tenure of the FD, the interest that you earn on your FD remains fixed. A FD is also called a Term Deposit at times, as it is an investment for a pre-defined term.

All banks have their own rules on minimum deposits.Most nationalized banks will start a FD with just Rs.1000.

The tenure of a FD can be anywhere from 15 days to 10 years.The rate of interest offered on a FD depends on various parameters: the prevailing interest rates, the duration of the FD, the amount of the FD, your age, etc.Usually, the longer the tenure of the FD, the higher is the interest rate.However,when the economy has a liquidity crunch,banks do offer higher rates on short-term deposits too.They also come out with Special Term Deposits of more unusual tenures such as 555 days, 1001 days etc.Most banks offer a different rate of interest on FDs of more than a certain amount, usually Rs. 15 Lakhs.Also, most banks offer an extra 0.5% per annum to Senior Citizens.Some banks also offer different rates for Trusts and Societies. Read more of this post

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