Recurring Deposit, often called RD, is a great investment option offered by banks, NBFCs, and post offices in India that allows you to save a small sum regularly instead of a lump sum. It is used to build a savings corpus over the long and short term.
With an RD account, the customer can earn interest on his/her regular savings, which will be paid out along with the principal amount after the maturity period.
Recurring Deposit (RD) is the perfect investment option for people who can spare a small sum of money regularly but not a big sum in one go. What makes RDs popular is that they are known to provide a higher rate of interest than a normal bank deposit. In addition to that, they are easily accessible and can be instantly opened in a bank or a post office.
Let’s see how a depositor can open a Recurring Deposit account:
Table of Content
- 1 Opening a Recurring Deposit Account
- 2 Opening a Recurring Deposit Account Online
- 3 Opening a Recurring Deposit Account Offline
- 4 Frequently Asked Questions:
Opening a Recurring Deposit Account
A depositor can open a Recurring Deposit account either with a bank or the post office.
The account may be opened either by visiting a bank where you have a savings account (offline method) or by logging on to the bank’s net banking website (online method).
In order to open the RD in a post office, one has to visit the nearest post office.
Eligibility Criteria for Recurring Deposit Account
- Any individual including members of the Hindu Undivided Family (HUF), senior citizens, and Non-Residential Indians (NRIs).
- An individual above the age of 10 is a minor but is eligible to open the RD account if he/she can provide the documents with details.
- An individual below the age of 10 years can also open the account under a legal or natural guardian.
- Any government or corporate, company, proprietorship, or commercial organisation.
Documents Required for Recurring Deposit Account
Here’s a list of documents you need to open an RD account:
1. Application form: Depending on the bank or post office (PO) you choose to open the recurring deposit account in.
2. Photograph: Passport size photographs of the individual who is applying for the Recurring Deposit Account.
3. Identity Proof: This can include your passport, driving license, service identity card of state or central government, PAN card, or aadhar card.
4. Address Proof: This can include your passport, driving license, aadhaar card, water bill, telephone bill, or even your electricity bill.
5. KYC documents: To verify the “Know Your Customer” details of the applicant willing to open the Recurring Deposit account.
Opening a Recurring Deposit Account Online
Opening a Recurring Deposit account online is a simple process. Here’s all you need to know about how to open an RD account online.
Points To Remember Before Opening an Online Recurring Deposit
- To open a Recurring Deposit account online, you need to make sure that you have activated the net banking facility in the bank where you hold an account.
- In most cases, it is mandatory to have a savings account with the bank where you open an RD account.
- You can choose from the many types of RD schemes available – regular RD, Flexi RD, Senior citizen FD in case you are 60 or above, and NRI/NRO FD for NRIs.
Every bank has a specific set of rules, which may vary when it comes to net banking or opening an RD account.
You are advised to speak with your bank personally to know the exact requisites of opening an RD account online to be sure you don’t miss out any.
Steps for Opening a Recurring Deposit Account Online
To open an RD account online, you need to make sure that you have activated the net banking facility in the bank where you wish to hold the account.
In case you don’t have a net banking facility enabled on your banking account, you can do so by speaking with your bank and filling out a net banking registration form.
- Go to the bank website and login into your account using your User ID and password in order to access your account online.
- Pick the option that allows you to open an RD account.
- Fill in the details such as the amount which you wish to deposit each month and the tenure of deposit, i.e. the period for which you wish to hold your Recurring Deposit.
- Once this is completed, you have to link your savings account to this account from which you can not only transfer the required funds to the account regularly but also opt to place a standing instruction mandate to make the payment automatically, by the due date each month.
How to Make a Recurring Deposit Online Payment?
Depending on the bank, regular payments for Recurring Deposits can be made online using the ECS facility, online banking, or fund transfer.
In other cases, you can give standing orders to your bank to deduct a certain amount every month for your Recurring Deposit Account.
Opening a Recurring Deposit Account Offline
To open an RD account offline, what you need to do is go to the bank branch and fill up a form to open an RD account. When opening an RD account, you will need to decide the RD tenure, the installment amount, the nomination details, and the maturity amount. After filling up the required details, submit the form to the bank along with a cheque for the installment amount.
In case you are a customer of the bank, you need to put in your bank account details along with other details such as maturity instructions, nomination details as mentioned above. On the other hand, if you are opening an RD account in a bank in which you don’t have an account, then you will have to provide your KYC documents along with the account opening form and other details.
After that, you will need to either give standing instructions to your bank for a periodic installment debit towards the RD account or personally deposit money in your RD account regularly for every installment.
If your annual income is below the minimum taxable amount but your annual interest is over Rs. 40,000 or Rs. 50,000 for senior citizens, then in order to get an exemption from TDS on your interest, you need to submit Form 15G/15H. After this, once the RD is processed and opened, your bank will provide an RD certificate bearing all details.
Frequently Asked Questions:
Depending on the bank, the minimum amount of investment varies from Rs. 500 or Rs. 1,000.
The investment amount is lower at Rs. 10 every month for post office RDs.
RD tenure usually ranges from a minimum of 6 months to a maximum of 10 years. In the case of online RD, some banks may have a minimum tenure of 12 months.
Currently, for a post office RD, the minimum tenure is 5 years, which means one needs to ensure that his/her account is active during this period.