Recurring Deposit (RD)

Recurring Deposit is a special kind of Term Deposit offered by banks in India which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits. It is similar to making FDs of a certain amount in monthly installments, for example Rs 1000 every month. This deposit matures on a specific date in the future along with all the deposits made every month. Thus, Recurring Deposit schemes allow customers with an opportunity to build up their savings through regular monthly deposits of fixed sum over a fixed period of time.Minimum Period of RD is 6 months and maximum is 10 years.

The Recurring Deposit can be funded by [Standing order (banking)|Standing instructions] which are the instructions by the customer to the bank to withdraw a certain sum of money from his Savings/ Current account and credit to the Recurring Deposit every month.

When the RD account is opened, the maturity value is indicated to the customer assuming that the monthly installments will be paid regularly on due dates. If any installment is delayed, the interest payable in the account will be reduced and will not be sufficient to reach the maturity value. Therefore, the difference in interest will be deducted from the maturity value as a penalty. The rate of penalty will be fixed upfront. Interest is compounded on quarterly basis in recurring deposits.

Fixed Deposit (FD)

A fixed deposit (FD) is a financial instrument provided by banks which provides investors with a higher rate of interest than a regular savings account, until the given maturity date. It may or may not require the creation of a separate account. Term deposits in India is used to denote a larger class of investments with varying levels of liquidity. The defining criteria for a fixed deposit is that the money cannot be withdrawn from the FD as compared to a recurring deposit or a demand deposit before maturity. Some banks may offer additional services to FD holders such as loans against FD certificates at competitive interest rates. It's important to note that banks may offer lesser interest rates under uncertain economic conditions. The interest rate varies between 4 and 11 percent.

Fixed deposits are a high-interest -yielding Term deposit and offered by banks in India. The most popular form of Term deposits are Fixed Deposits, while other forms of term Deposits are Recurring Deposit and Flexi Fixed Deposits (the latter is actually a combination of Demand deposit and Fixed deposit).

To compensate for the low liquidity, FDs offer higher rates of interest than saving accounts. The longest permissible term for FDs is 10 years. Generally, the longer the term of deposit, higher is the rate of interest but a bank may offer lower rate of interest for a longer period if it expects interest rates, at which the Central Bank of a nation lends to banks ("repo rates"), will dip in the future.

Usually in India the interest on FDs is paid every three months from the date of the deposit. (e.g. if FD a/c was opened on 15th Feb., first interest installment would be paid on 15 May). The interest is credited to the customers' Savings bank account or sent to them by cheque. This is a Simple FD. The customer may choose to have the interest reinvested in the FD account. In this case, the deposit is called the Cumulative FD or compound interest FD. For such deposits, the interest is paid with the invested amount on maturity of the deposit at the end of the term.

Monthly Income Scheme

Monthly Income Scheme (MIS) is an investment scheme of Indian postal service. It promises the investor guaranteed returns at 8.5% per annum in the form of fixed monthly income. Seasoned investors consider MIS to be one of the smartest options to park funds as it gives you three merits – keeps your capital intact, yields better returns than debt instruments and assures a fixed monthly income. The money can be withdrawn in two ways, either directly from post office or get it credited in your savings account through ECS. The money is usually meant to be withdrawn on a monthly basis. However, the investor can let it to accumulate over a few months and then withdraw it but it’s not of much use as the idle money will not earn you any interest.

Key Features of Post Office Monthly Income Scheme

The maturity term for MIS is 5 years. Ideally, you should withdraw the amount after 5 years. At the end of the term, you’ll get back every single penny that you had invested. Needless to say, you keep getting your fixed monthly income for this whole period. However, if you have to withdraw the money before 5 years, here’s what happens.

  • Withdraw the deposit within 1 year – You get nothing
  • Withdraw the deposit in 1 -3 years – You get your deposit back after a nominal 2% deduction (as a penalty)
  • Withdraw the deposit after 3 years - You get your deposit back after a nominal 1% deduction (as a penalty)

Saving Account

Our Savings Account gives you the advantages of competitive interest rates and the availability of your funds, without forfeiture of interest in case of withdrawal. The account may be owned by an individual, organization or association.

FEATURES/BENEFITS

  • No Minimum opening balance
  • Funds transfer to all commercial banks in Nigeria
  • Attractive interest rates
  • Free statement of account (on request)
  • Transparent and speedy transactions
  • SMS Alert services
  • Withdrawals up to available balance in account.