Features of Recurring Deposit

Recurring deposit is the term which is used in the context of bank deposits, in recurring deposit schemes individuals can deposit fixed amount every month and earn interest on those deposits at rates equivalent to term deposits. Given below are the various features of recurring deposit –

  1. Recurring deposit are basically meant for those who people who cannot afford to save money in big amounts at one go hence one can say that this scheme is meant for individuals who are financially not that sound or for those who do not want to block their money at one shot.
  2. Under recurring deposit one has to deposit fix amount every month in the bank for a period which is predetermined by the saver. One can also give standing instruction to the bank to debit his or her saving account every month so that the individual does not have to go to bank every month to deposit the money in recurring deposit account.
  3. Under recurring deposit scheme the rate of interest is equivalent to term deposit so for example if rate of interest on term deposit for 2 year is 10 percent then rate of interest on 2 year recurring deposit will also be 10 percent.
  4. Recurring deposit is flexible because one can deposit money at any date in a month so for example if you want to deposit money in January in first week and in February in second week than one can do it provided that he or she has not given mandate for standing instructions to the bank.
  5. Banks do not deduct tax at source on recurring deposit which is the case with term deposit and hence those people who are not under tax bracket can take this benefit from recurring deposit.

As one can see from the above that recurring deposit is a mass product and good source of deposit base for the bank and therefore it is becoming important part of retail banking marketing and that is the reason why many banks are offering and promoting this product to their customers.

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