Indian Bank Recurring Deposit Interest Rates
If you are looking for a fixed income investment where you receive a commitment from the bank that you will be repaid your capital, with an additional fixed sum of interest, you can typically choose between fixed deposits and recurring deposits. However, recurring deposits come with the additional benefit of accommodating very small investment amounts, even as low as Rs 100. This means that an investor does not have to gradually put together Rs 10,000 or Rs 20,000 to invest in a fixed deposit, or even Rs 1000 or Rs 1500 to invest in a mutual fund SIP. Almost any salaried employee can kick of their investing journey at a monthly savings target of Rs 100, and that is one of the main reasons behind the popularity of recurring deposits.
We will give you the Indian bank RD rates anticipated for 2022 as promised. But before that, understand if RDs are the investment type for your financial goals and the pros and cons of recurring deposits.
Is a recurring deposit ideal for you?
Recurring deposits come with certain benefits and these benefits are most useful for certain investor profiles such as:
Retirees/ near retirees
If you are approaching retirement, or a stage when you will no longer be earning a fixed salary, you might want to invest in low to no risk investments, like recurring deposits, that will allow your capital to grow gradually over time. You can choose short term recurring deposts, withdraw the interest amount for your use upon maturity, reinvest the principal amount and repeat the process to maintain a regular income.
New investors
If you have heard about how you can invest your money and then get back more money than you invested after a few months and would like to witness how this works for yourself, recurring deposits are a great place to start your investing journey.
Big spenders/ small earners
Likewise, if you have trouble getting to payday without burning through the previous salary, maybe you should start small, but start investing nonetheless, with a recurring deposit. No matter how small your salary is or how big your lifestyle is, you can afford to direct-debit at least Rs 100 from your bank account immediately after pay day.
Rebalancing investors
Investors who put a large amount of their capital in the stock market and in stock-market-linked instruments will usually also put a portion of their capital in fixed-income investments. This is part of portfolio diversification, where one invests in different asset classes (or investments that have little or no correlation with one another). The goal is for low earnings or losses in any one investment to be made up for stable or high earnings in another investment. Such investors might invest spare capital in recurring deposits as part of a risk management strategy.
Pros and cons of recurring deposits
Recurring deposits are beneficial because:
- They push you to save regularly and yet, allow you to save small amounts if necessary
- You get a commitment from the bank with regards to capital repayment and interest rate
- They are far more low risk than many other types of investments, such as mutual funds
- Almost all banks offer the facility for a recurring deposits
- Similarly, almost all banks offer you a loan or overdraft facility against your recurring deposit
You should consider the following factors before investing in a recurring deposit
- Recurring deposits are safe and offer a fixed income but the interest amount is low as compared to investments that might possess a higher risk profile
- In case the investor is unable to pay their installment, penalties are levied
- The investor’s capital is relatively risk-free but not entirely risk-free because situations like the one with PMC can arise and capital can get stuck
- To minimize your losses and / or inconvenience from such a situation you should also consider spreading your investment capital across multiple banks. That way, in case of any issues, only a portion of your capital gets stuck/ lost
- Capital is tied up for the tenure of the deposit, though some banks allow for investors to foreclose their deposit with no penalties charged
- Different banks charge varying levels of fees and charges and the interest rates offered also differ between banks. Investors should use an RD calculator to find out how many rupees of interest he will earn; how many rupees of fees and charges he will pay and also how much he stands to lose on penalties if any. The investor should deduct the possible penalties and fees and charges from the interest amount and compare the amount of earnings he arrives at, for different banks.
Indian Bank RD interest rates anticipated for 2022
The bank has revised its interest rate from 3% to 2.90% on term deposits, and says that an additional 0.50% is applicable on recurring deposits. This means that regular recurring deposit investors get 3.40% interest on their recurring deposits and senior citizens get Rs 3.90%. The bank states that, “Interest calculated on a daily basis as above would be credited on a quarterly basis in the months of June, September, December and March every year.”
Conclusion: Recurring deposits could be a great way to earn interest with minimal capital risk, but be sure to shop around and get the best deal.
