What is a Long term Recurring Deposit?
Recurring Deposit is a distinguished ilk of Term Deposit propounded by banks in India assisting folks with general income group to deposit a fixed amount every month into their Recurring Deposit account. A recurring deposit is a financial tool where capitalist deposit a predetermined fixed sum of money each month for a specified period of time.
And this deposited amount earns interest at the rates similar to that of Fixed Deposits. It is similar to making FDs of a certain amount in monthly instalments.
Recurring deposit mellows or matures on a specific date fixed in the future accompanied with all the deposits made every month. Thus, Recurring Deposit layout acknowledge prospects with an opportunity to constitute their savings via regular monthly deposits of fixed amount and for a fixed period of time.
Types Of Recurring Deposits
- Long term
- Short term
Recurring deposits can be of two types: short term as well as long term.
A long term recurring deposit can endure upto a maximum period of 10 years, with the interest on the principal compounded every quarter.
Tenancy and Minimal Amount
As per banking parameters, a deposit held for long term has a maximum duration of ten years. It keeps the money locked for the specified tenure.
It is generally over 5 years unlike general recurring deposits. A premature withdrawal of recurring deposits can prove to be a breakneck due to the penalties for non-compliance attached.
A key important point to be noted is that the account must possess sufficient funds to be debited with the predetermined amount, non-compliance of which carries a charge which differs from bank to bank.
Specified Criteria to be ensured
Folks willing to initiate a recurring deposit are expected to meet certain eligibility criteria as prescribed by different banks.
Most banks would crave for individuals to open a savings bank account in their banks so that transferring the interest amount is apparent and free of commotion for the individual.
Apart from eligibility criteria, there are certain documents to be submitted to the bank to when applying for a recurring deposit. The list of documents is given below:
- Identification proof
- Proof of address.
- Passport sized photographs.
Long Term Recurring Deposit Interest Rates
Long term recurring deposits are offered by numerous banks, with each bank offering differential interest rate depending on the specified interval of deposit.
Planning the Goals
A recurring deposit is a pleasant stroke to save money for many future financial prospects to encounter. The calculations involved in the process can easily be managed using an RD calculator. Make sure you use it from a trusted site, like Upwardly.in. You can go through the website here. As a fixed amount is being deducted from your bank account each month, the encumbrance of saving a segment or setting money aside in personal interest is dealt with.
We can choose the amount we actually wish to deposit into the recurring deposit account every month, as we have the resilience of setting an amount of our own choice. In the case of meeting a long term financial goal, we can split up a huge investment into petite divisions through monthly deposits.