A Recurring Deposit (RD) is a savings plan offered by banks and financial institutions. It allows individuals to invest a fixed amount of money at regular intervals, typically monthly, and earn interest on their deposits. Long-term RDs refer to deposits with a longer tenure, usually exceeding five years and up to the maximum limit set by the bank (often ten years).
RDs typically offer interest rates ranging from 2.50% to 8.50% annually. Long-term recurring deposits are ideal for individuals with long-term financial goals, such as retirement planning or saving for a child's education. Consider a long-term RD if you have a well-defined, long-term financial goal.
Banks typically allow you to borrow a percentage of your RD's current balance, often ranging from 50% to 80%. You can access a portion of your savings without breaking the deposit entirely.
Table of Contents:
- ⇾ Long-Term RD Interest Rates
- ⇾ Eligibility Criteria For Long-Term Recurring Deposit
- ⇾ Documents Required for Long-Term Recurring Deposit
- ⇾ Long Term RD Vs Regular RD
- ⇾ Advantages of Long-Term Recurring Deposit
- ⇾ Tenures For Long-Term RD
- ⇾ Steps to Open a Long-Term RD Account
- ⇾ Frequently Asked Questions
Long-Term RD Interest Rates
Long Term Recurring Deposits (RDs) involve accumulating a significant sum. It offers a safe and disciplined way to save regularly, but maximizing your returns depends on understanding long-term RD interest rates.
The table below shows the long-term recurring deposit interest rates and other charges.
| Feature | Rates and Charges |
|---|---|
| Interest Rates | Between 2.50% - 8.50% p.a. |
| Minimum Deposit Amount | ₹100 |
| RD Investment Tenure | Up to 10 years |
| Compounding Interest Frequency | Every quarter. |
| Premature Withdrawal | Allowed with penalty |
| Partial Withdrawal | Is not allowed |
Long-Term RD Interest Rates By Top Banks
The table below provides a comparison of long-term Recurring Deposit (RD) interest rates (for 1 -2 years) offered by leading banks in India.
| Top Banks | Interest Rates (Regular Citizens) | Interest Rates (Senior Citizens) |
|---|---|---|
| Indian Overseas Bank | 6.50% | 7.00% |
| State Bank of India | 6.80% | 7.30% |
| Canara Bank | 6.90% | 7.40% |
| UCO Bank | 6.50% | 7.00% |
| Central Bank of India | 6.75% | 7.25% |
| Bank of India | 5.00% | 5.50% |
| IDFC First Bank | 6.50% | 7.00% |
| ICICI Bank | 6.70% | 7.20% |
| Kotak Mahindra Bank | 4.90% | 5.40% |
| Axis Bank | 7.10% | 7.85% |
| Punjab National Bank | 6.75% | 7.25% |
| City Union Bank | 5.50% | 6.00% |
| Federal Bank | 7.30% | 7.80% |
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Tenures For Long-Term RD
Long-term recurring deposits (RDs) can vary slightly depending on the bank, but it's considered to be anything over 5 years up to a maximum of 10 years.
| Tenure | Description |
|---|---|
| 6 months to 1 year | Short-term tenure |
| More than 1 year to 5 years | Medium-term tenure |
| More than 5 years to 10 years | Long-term tenure |
Long-term RDs offer the benefit of potentially higher interest rates compared to shorter tenures. However, they also lock your money in for a longer period. So, it's important to choose a tenure that aligns with your financial goals and ensures you won't need the money before maturity.
Eligibility Criteria For Long-Term Recurring Deposit
Long Term Recurring Deposits are a popular savings plan that allows individuals to invest fixed amounts at regular intervals over an extended period. To invest in a long-term recurring deposit, you need to be eligible to meet the bank's minimum age requirement.
Here's a list of eligibility criteria for opening an RD account.
- Age: Most banks allow individuals above 18 years to open an RD account. Some banks may also allow minors with a guardian's help.
- Minimum deposit: There's a minimum amount you need to deposit every month, which can vary between banks. It usually starts from Rs. 100 for public sector banks and can be higher for private banks.
- Tenure: Long-term RDs typically have tenures ranging from a few years up to 10 years.
Documents Required for Long-Term Recurring Deposit
The documents required to open a Long-Term Recurring Deposit (RD) account are typically quite basic and focus on verifying your identity and residence.
- Proof of Identity (POI): This can be a passport, Voter ID card, Aadhaar card, or Driving License (whichever is most convenient for you).
- Proof of Address (POA): A recent utility bill (electricity, water, phone), bank statement, or rental agreement can serve as address proof.
- Passport-sized Photograph: Some banks might require a recent photograph for your RD account records.
- Form 16 (for salaried individuals): This could be requested in some cases, especially for high-value RDs.
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RD Calculator
Calculate your recurring deposit returns with ease using an online RD Calculator. Just input the invested amount, tenure, and interest rate to check your RD maturity amount & interest earned.
| Invested Amount | : ₹1,000 |
| Total Interest | : ₹532 |
| Maturity Amount | : ₹12,532 |
Long Term RD Vs Regular RD
Knowing the differences between long-term recurring deposits and regular deposits will help investors make informed decisions about which type of RD best aligns with their savings objectives.
The table below shows the differences between long-term RDs and regular RDs.
| Feature | Long Term RD | Regular RD |
|---|---|---|
| Tenure | Typically exceeds 5 years, up to 10 years | Typically ranges from a few months to 5 years |
| Interest Rates | Offer slightly higher interest rates due to a longer lock-in period | Offers lower interest rates compared to Long Term RDs |
| Liquidity | Lower liquidity due to longer tenure | Higher liquidity |
| Withdrawal Penalty | Early withdrawals come with penalties. | Lower (or no) penalty for early withdrawal. |
| Suitability | Ideal for long-term financial goals. | Suitable for shorter-term savings needs. |
| Discipline | Encourages a disciplined savings habit. | May be less effective for enforcing a savings habit. |
Advantages of Long-Term Recurring Deposit
Long Term Recurring Deposits (RDs) offer a range of advantages including guaranteed returns, disciplined saving, and the potential for higher interest. In short, Long Term RDs are for individuals with long-term financial goals.
Here's a list of advantages of Long Term Recurring Deposits (RDs).
- Higher Interest Rates: RDs typically offer higher interest rates, especially for longer tenures. This allows you to earn more on your deposited money over time.
- Compound Interest: The interest earned on RDs is compounded periodically, which means you earn interest on both the principal amount and the accumulated interest.
- Savings Discipline: A recurring deposit encourages regular savings habits. By setting up a fixed deposit amount to be deducted automatically each month, you can ensure consistent savings without needing to manually transfer funds every time.
- Achieve Long-Term Goals: RDs are well-suited for planning long-term financial goals like retirement planning, down payment on a house, or a child's education. The predictability of the maturity amount and returns allows for better financial planning.
- Low Risk: RDs are a safe investment option as they are not linked to the market's fluctuations. The interest rate is fixed at the time of deposit, and you are guaranteed to receive your principal amount plus the earned interest at maturity.
- Loan Against RD: In some cases, you may be able to take a loan against your RD deposit. This provides access to liquidity if needed, without having to break the deposit and lose out on potential interest earnings.
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Steps to Open a Long-Term RD Account
You can open a long-term RD account through two main methods: online or offline at a bank branch.
Open RD Account Online
- Step 1: Log in to your bank's net banking or mobile banking app.
- Step 2: Look for an option to "Open a recurring deposit account" or similar wording.
- Step 3: Choose the account you want to link for automatic installments and enter your preferred deposit amount.
- Step 4: Select the RD tenure (deposit period) and the date for your first installment.
- Step 5: Review the interest rate and nominate someone to receive the account proceeds in case of your absence.
- Step 6: Agree to the terms and conditions and apply.
- Step 7: The bank will send you a confirmation message and email with details about your RD.
Open RD Account Offline
- Step 1: Visit your nearest bank branch, preferably where you have a savings account.
- Step 2: Ask for a recurring deposit account application form.
- Step 3: Fill out the form with details like your preferred installment amount, deposit period, nominee information, and mode of payment (cash or cheque).
- Step 4: Submit the application form along with your first installment amount.
- Step 5: The bank representative will process your application and provide you with a receipt.
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Check bank-wise RD Interest rate and other related pages from the table below:
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Frequently Asked Questions
The main difference between long-term and regular RDs is tenure. Long-term RDs typically last for over 5 years, whereas regular RDs can range from 6 months to 5 years.
The minimum tenure for RDs is 5 years and the maximum tenure for RDs is typically 10 years, though some banks may offer slightly shorter or longer options.
Long-term recurring deposits (RDs) offer higher interest rates and the power of compounding for better returns, making them ideal for planning long-term financial goals like retirement or a child's education.
Withdrawing money early from a long-term RD is generally not recommended, but some banks allow a one-time partial withdrawal (up to 50%) after a minimum period (often 1 year) with a penalty on the interest earned.
Long-term recurring deposits generally don't come with tax deductions on the principal amount invested. However, the interest earned might be subject to TDS (Tax Deducted at Source) depending on the amount.
Interest rates on long-term RDs (typically 1-10 years) vary depending on the bank and account type but generally range from 2.5% to 8.5% per annum. Senior citizens may be eligible for higher rates.
Yes, there can be a penalty for missing an installment in a long-term RD. The penalty typically varies by bank and depends on the RD tenure.
Increasing the monthly installment in a long-term RD is not possible. Decreasing the installment might be allowed by some banks with a penalty fee. It's best to check with your bank about their specific policy on installment changes for RDs.
You can open a long-term recurring deposit (RD) account online through your bank's mobile or internet banking app, or by visiting a branch and filling out an application form.
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