Banks offer recurring deposits (RDs) and fixed deposits (FDs) as ways to encourage saving. In an FD, the deposited amount is locked in for a set period of time, while in an RD, a set amount must be deposited every month for a set period of time. Both RDs and FDs can be opened online through mobile banking apps or internet banking.
There are several differences between fixed deposits (FDs) and recurring deposits (RDs) in terms of their features, deposit requirements, tenure, interest rates, benefits, and limitations. This article will provide an overview of both FDs and RDs, including their benefits and features, and will compare the key differences between these two types of deposit accounts.
A Comparative Difference Between Recurring Deposit and Fixed Deposit
The difference between fixed deposit and recurring deposit is given below:
|Parameters||Fixed Deposit||Recurring Deposit|
|When to deposit amount||Lump sum in one go||Every month|
|Who can open||Anyone with a bank account||Person with a regular source of income|
|Amount to be deposited||Varies from one bank to another
*With Paytm Payments Bank, FD can be created with as low as ₹100
|Particularly Rs 500|
|Tenure||7 days to 10 years
*Paytm Payments Bank allows fixed deposits (FDs) to be redeemed at any time, including on the same day they are created. The interest rate on an FD may vary based on the number of days the FD is held.
|6 months to 1o years and beyond|
What is a Recurring Deposit Account?
A recurring deposit (RD) is a financial product offered by banks in which customers with a steady income can deposit a fixed amount of money into an RD account on a monthly basis. When the customer deposits the money, they become eligible to earn interest on it. RDs are a type of term deposit.
- A recurring deposit account requires customers to deposit a fixed amount of money on a monthly basis for a pre-determined period.
- These accounts can help promote good saving habits.
- Recurring deposit accounts can be opened for short, medium, or long terms, and the interest rate offered by the bank may vary depending on the term chosen.
- Banks offer different types of recurring deposits to individuals, children, senior citizens, and non-resident Indians (NRIs), with varying interest rates.
- The process of opening a recurring deposit account may differ between banks.
- It is possible to close a recurring deposit account, but a penalty may be incurred.
What are the Features of a Recurring Deposit Account?
Following are the features of a recurring deposit account that make it a preferable choice to save for the future-
- The minimum monthly amount to open a recurring deposit account may be around Rs. 500, although this amount may vary between banks.
- The minimum tenure for opening a recurring deposit account is typically six months, with a maximum tenure of ten years.
- Individual account holders may be able to open multiple recurring deposit accounts.
- Minors may be able to open recurring deposit accounts with the supervision of their parents or guardians.
- Partial withdrawal of funds from a recurring deposit account is generally not allowed.
- Some banks may offer an automatic deduction feature that allows a set amount to be deducted from the account holder’s account every month, rather than requiring manual deposits.
- Senior citizens may be eligible for a higher interest rate on their recurring deposit accounts.
- Withdrawing funds from a recurring deposit account before the end of the term may incur a penalty.
- Recurring deposit accounts typically require account holders to deposit a set amount every month rather than a lump sum upfront.
What are the Types of Recurring Deposit Accounts?
The following are the various types of recurring deposit accounts in which a user can invest:
|Types of Recurring Deposit Account||
|Regular recurring deposit account||
|Recurring deposit account for minors||
|Recurring deposit account for NRI||
|Recurring deposit accounts for senior citizens||
How to Open a Recurring Deposit Account Online?
The following are the steps that must be taken by the user in order to open a recurring deposit account online:
- Log in to the bank’s mobile application.
- Find the option to open a recurring deposit account, such as under the “investment” or “savings” section.
- Input the desired deposit amount and select the desired tenure and type of recurring deposit account.
- Specify the date on which the monthly deposit will be made.
- Click the “proceed” or “submit” button to complete the process.
Currently, Paytm Payments Bank Limited (PPBL) does not offer the option to open a recurring deposit account online.
How to Open a Recurring Deposit Account Offline?
The options for opening an offline recurring deposit are as follows:
- Visit your local bank.
- Speak with a bank official and complete the application form for a recurring deposit account, providing details such as the monthly deposit amount, the type of recurring deposit account you wish to open, the tenure, and any nominees.
- Submit the application form and the deposit amount.
- The bank official will process your application for a recurring deposit account.
Currently, Paytm Payments Bank Limited (PPBL) does not offer the option to open a recurring deposit account in person at a bank branch.
What is a Fixed Deposit Account?
Fixed deposits, also known as term deposits or time deposits, are financial products offered by banks and non-banking financial institutions (NBFCs) that provide a safe way to save for the future. With an FD, users can deposit a lump sum of money for a set period of time and receive interest payments either monthly, quarterly, or upon the maturity of the deposit. FDs also offer a range of other features and benefits, such as:
- Customers can earn interest on their deposits for a fixed period of time.
- The interest rate on an FD is locked in and does not change, regardless of market or interest rate fluctuations.
- Customers have the option of receiving interest payments either regularly or upon the maturity of the FD.
- The deposited amount in an FD cannot be withdrawn before the maturity date. If someone wishes to withdraw the funds early, they may have to pay a penalty.
What are the Key Features of Fixed Deposits?
Listed below are all the features of fixed deposits that you should know before investing in them:
- An FD requires a one-time lump sum payment, although additional amounts can be deposited as separate FDs.
- FDs offer guaranteed returns.
- Depositors can choose to receive interest payments on a monthly, quarterly, annual, or upon maturity basis.
- FDs are a low-liquidity investment option.
- FDs typically offer higher interest rates compared to other investment options.
- The returns on an FD are not affected by market fluctuations.
- Customers cannot withdraw funds from an FD before the maturity date, although in certain circumstances an emergency withdrawal or willful withdrawal may be possible with a penalty.
- Customers can choose to reinvest their FD after it matures.
- There is no maximum limit on the amount that can be deposited in an FD.
What are the Types of Fixed Deposits?
The types of fixed deposits are:
|Type of fixed deposits||
|Cumulative Fixed Deposit||
|Non-Cumulative Fixed Deposit||
|Senior citizen FD||
|Tax saving FDs||
How to Open an FD Account Online?
Following are the steps to open an FD online:
- Log in to your bank’s online banking platform
- Go to the fixed deposit section of the portal
- Fill in the required information and submit the form
- If you are opening the FD account with a bank you already have an account with, you may not need to complete the Know Your Customer (KYC) process again as the bank already has your information on file.
- If you are opening a new FD with a new bank, make sure you have all of the necessary KYC documents and a passport-sized photograph ready to provide to the bank.
How to Open an FD Account Offline?
To open an FD account offline:
- Visit the bank’s branch and obtain an application form for a fixed deposit account
- Fill out the form with all of the required information and submit it to the concerned official
- Deposit the required amount and collect the deposit receipt
- If you are opening a fixed deposit account with a new bank, it is recommended to contact an official who can guide you through the entire process. In addition, bring all of the necessary Know Your Customer (KYC) documents and a passport-sized photograph to complete the account opening process.
There are several key differences between fixed deposits and recurring deposits, including the amount of money that can be deposited, the duration of the deposit, and the frequency of deposits. Fixed deposits allow individuals to lock in a specific amount of money for a predetermined period of time, while recurring deposits allow individuals to make regular deposits over a set period of time. Both types of accounts can be useful for encouraging savings habits, but the best choice will depend on an individual’s financial goals, needs, and the services and interest rates offered by different banks. It is important to carefully compare these factors before deciding which type of account to use.