Learn About RD Interest Rates
Published On Jan 21, 2022 11:00 AM By InsuranceDekho
Table of Contents
- Types of Recurring Deposit Interest Rates
- Factors That May Affect Recurring Deposit Interest Rates
- Benefits of Recurring Deposit Interest Rates
The interest rate offered by banks on RDs depends on factors like which category you fall under and the tenure you choose. Most banks offer senior citizens a higher rate of interest when compared to regular citizens. A variety of RD schemes are made available to you by banks. In addition to the regular schemes, special schemes are also offered to help you achieve the goals. The interest rates offered by banks on Recurring Deposit range between 5.50% to 7.75% p.a. (1 year to 5 years and above) for the general public. Senior citizens are offered an additional rate of interest by banks for opening an RD account.
Types of Recurring Deposit Interest Rates
1. Regular Savings Scheme
Banks offer recurring deposits to Indian citizens above the age of 18 years. Customers can choose to deposit a fixed sum of money for a period of time, usually between 6 months to 10 years. Interest can be computed on a simple or compound basis. At the end of the tenure, the lump sum amount can be withdrawn. Some schemes allow you to reinvest the money. You can open a recurring deposit for as little as Rs. 10 per month. The interest rates on the regular recurring deposits range between 4.75% to 7.50% per annum.
2. Junior RD Schemes
Bank’s also offer recurring deposit schemes for kids. Parents or guardians can open these deposits for their children to start saving for their future, education and other needs. Students can also avail of these deposit schemes. Learning to handle finances and the importance of saving at a young age will help inculcate a smart sense of money. The interest earned on these deposits will either be equivalent to the regular RD schemes or be higher to encourage saving amongst the youngsters.
3. Senior Citizens RD Schemes
Banks offer higher rates of interest for senior citizens. Usually, 0.50% per annum is given over and above the prevailing interest rate. The interest rates range between 5.75% to 8.40%. There are also schemes available that are designed to help senior citizens during their retirement and old age.
4. NRE/NRO RD schemes
NRE and NRO recurring deposit accounts may be offered a lower interest rate. Furthermore, senior citizens who hold NRE/NRO accounts will not be offered the additional interest rate. The rate of interest starts generally at 5.75%.
5. Special RD Schemes
Banks offer different schemes designed to suit the needs and capabilities of a variety of people. These schemes generally carry a higher rate of interest as your goal is more specific. ICICI Bank offers the iWish deposit which allows you to contribute various amounts of money to your RD account. Furthermore, other people can also contribute to help you reach your goals. There are RD schemes with free life insurance available. With certain schemes, you are allowed to withdraw the money in part without breaking the full deposit. Other schemes reward you with a bigger lump sum amount which makes it a worthwhile investment.
Factors That May Affect Recurring Deposit Interest Rates
1. Type Of Account
The account you hold will make a difference in the eligible interest rates. Regular savings accounts usually get higher interest than the NRE/NRO accounts. Some banks offer the same interest rates to both account holders.
The tenure of your deposit is one of the most important factors in determining the RD interest rate. Medium term deposits generally earn a much higher interest rate. Some banks offer the highest rate on long-term deposits of 10 years. But this is not always the case as some banks also offer the same interest rate on a 1-year deposit as well as a 10-year deposit.
Almost all banks offer a higher rate of interest to senior citizens. This rate is usually 0.5% per annum higher than the regular interest rates. Junior accounts can also stand to earn a higher interest rate. This depends on the bank’s offer on minor accounts.
4. Choice of bank
Interest rates vary quite a bit between different banks. Currently, the top banks offer recurring deposits starting at 7% per annum interest. Nationalized banks tend to offer a higher interest rate of up to 8% per annum.
5. Schemes On Offer
Banks also have different recurring deposit schemes running. Corporation Bank has a Millionaire Scheme on offer wherein you will receive a million rupees at the end of the scheme. This deposit carries a very high interest rate of 9.25% per annum. So the choice of your deposit scheme will also factor into the interest rate. Depending on the benefits offered with the RD scheme, your interest rate may vary.
Benefits of Recurring Deposit Interest Rates
1. Safe Investment
Recurring deposits carry no risk or very little at all. Choose a stable and secure bank to ensure that your money is safe. Recurring deposits are just a simple investment of your money and do not dabble in the markets. Therefore the interest rate will not fluctuate and you do not stand to lose any money.
2. Earn While You Save
Your deposit will earn interest from your first contribution. The interest accumulated will increase through your tenure. The longer you invest, the more interest you will earn.
3. Lump Sum Payout
At the end of the RD tenure, you will receive a lump sum of cash. This amount includes your contribution plus the interest earned. You can use the money to reinvest it or spend it on what you were saving for.
4. Online Access
Most banks offer Internet Banking services which you can use to open deposits, access your accounts and see the progress of your deposit. You can also view the different interest rates offered. You can pick the tenure and deposit amount suitable to you and also earn the highest interest offered.
5. Loan Offers
When you have an RD with a bank, you sometimes get pre-approved loan offers. In other cases, your loan applications will be given preference and your processing might be faster. In addition to this, banks offer concessional interest rates on loans as well.
In case you fail to make your RD installments on time, the bank has the right to close your RD account. The interest rate applicable will be as per the premature withdrawal policy of the lender.
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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.