What are the advantages of Recurring Deposits

6 MinsJuly 29, 2022

Investing is an art. To be a successful investor, you must be disciplined and consistent. Sometimes, you may lose track of your investment habits. In such cases, setting up an automated investment mechanism can ensure that you don’t fall off the “investing wagon”. Recurring deposits can be a great way to keep up your investment habit.

Know the advantages of a Recurring Deposit

What is a Recurring Deposit?
As the name suggests, a recurring deposit is a kind of term deposit where you can invest a fixed amount of money in regular intervals. A recurring deposit is similar to a fixed deposit, but instead of making a lump sum investment, you make investments over a period of time. At maturity, the invested amount and interest will be paid at once. It is a convenient way to save and invest your money. You can open a recurring deposit with any bank in India or with a financial institution.

Features of a Recurring Deposit

1. When you open a recurring deposit, you must invest a pre-decided amount of money at regular intervals.

2. The minimum amount to open a recurring deposit varies from one bank to another. It can even be as low as Rs. 500 a month. The tenure for recurring deposits ranges from 6 months to 10 years.

3. The return on recurring deposits is higher than that on savings accounts. It is usually at par with the interest received on fixed deposits.

4. Interest on recurring deposits is received at the time of maturity.

5. Pre-closure of Recurring Deposit is allowed.

Who Can Open a Recurring Deposit?

You have to fulfill certain eligibility criteria to open a recurring deposit.

1. You should be a citizen of India – resident or non-resident.

2. Anyone over the age of 10 years with valid identity proof can open a recurring deposit.

3. For minors below the age of 10, recurring deposits can be opened under the guardianship of an adult.

4. Companies, corporates, sole proprietors, commercial organizations and government organizations can also open recurring deposits.

5. You have to be an Axis Bank customer holding a Current Account/Savings Account.

Advantages of Recurring Deposits

There are many advantages of recurring deposits. Here are some noteworthy ones:
1. Guaranteed Returns:-Recurring deposits are fixed income instruments. This means that you will get fixed and assured returns on your investment. Unlike market-linked securities, these investments are stable, helping you easily plan your financial goals.

2. Low Risk:-Since they are fixed-income securities, recurring deposits are considered as relatively safe investment instruments. For risk-averse investors, it can be an excellent avenue to accumulate a corpus over a period of time.

[Also ReadNew to investing? Here’s why you should look at bank FDs]

3. Disciplined Investing:-Recurring deposits help you cultivate a disciplined investment habit. Since you have to invest periodically, the amount will get deducted automatically from your account.

4. Easy to Invest:-Opening a recurring deposit is easy. You can open one online with your bank account easily. You can also automate your investments to ensure that you keep on investing.

5. Easy Withdrawal:-One of the biggest advantages of recurring deposits is that you can close the account prematurely. You can quickly close the account and take the money if you have a pressing financial need. There may be penalties imposed, but it provides easy liquidity.

6. Short-term Goals:-Recurring deposits can be a good way to meet short-term goals. Since you know the returns that you will receive, you can plan your investment better. You can use a recurring deposit calculator to determine how to save for your financial goals.

Final Word
Recurring deposits can be a great way to inculcate a consistent saving and investment habit. The advantages of recurring deposits are numerous. You can invest in small amounts and at regular intervals. You will earn a higher rate of return than savings accounts. Recurring deposits can also help you meet your short-term goals with ease. Learn more about interest rate on deposits and open a recurring deposit account to gain control over your investment habits.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.