How to Open an Online Recurring Deposit Account?

The digital revolution has made the process of investing in financial instruments not only convenient but also straightforward. One such instrument that you can now easily access online is the recurring deposit (RD). In this article, we will guide you through the process of opening an online recurring deposit account in India.

A recurring deposit is a unique form of term deposit offered by banks and financial institutions in India. It allows investors to deposit a fixed sum of money at regular intervals, accruing interest at the same rate as a fixed deposit. The distinct advantage of an RD over a regular term deposit is that it enables investors to accumulate wealth through small, regular deposits rather than a single, large sum of money.

How to Open an Online Recurring Deposit Account

Here is a step-by-step guide on how to open an online recurring deposit account, providing you have an existing internet banking or mobile banking account with your chosen bank.

• Log In: Visit your bank’s website or mobile app and log in to your internet banking or mobile banking account.
• Navigate: Head to the ‘Deposits’ section of the interface. Here, you should find an option for ‘Recurring Deposits’ or ‘Open New Recurring Deposit’ depending upon the terminology adopted by your bank.
• Enter Details: Fill in the amount you would like to deposit each month, the tenure of the RD (usually ranging from 6 months to 10 years), and the nomination details.
• Use RD Calculator: Most banks provide an RD calculator. Use this tool to determine the maturity amount based on your monthly deposit, the tenure, and the current interest rate.
• Confirmation: After verifying all the details, proceed to confirm your transaction.

After these steps, your bank should instantly open your RD account and commence monthly deductions from your savings account. The principal amount, along with the interest, is repaid to you at the end of the tenure. The recurring nature of an RD makes it an excellent option for individuals eager to develop a disciplined saving habit.

However, before committing to a recurring deposit, weigh all the pros and cons associated with it. The interest rate, although higher than a savings account, is typically lower than what you might earn from a mutual fund or the stock market. Also, financial emergencies might necessitate breaking the RD before maturity, which might lead to penalties.

Always run your prospects through an RD calculator to forecast your end-of-term balance. It will give you a better idea of how much you could earn and whether the amount is significant compared to the potential earnings from other investment options.

Also, carefully consider the taxation policies on RDs. Unless exempted by the government, the interest income from RDs is added to your total income and taxed at the applicable slab rate.

Disclaimer

This article aims to inform and facilitate readers about the process of opening a recurring deposit account online. However, one must understand that investments in the Indian financial market come with inherent risk factors. Hence, it is critical for the investors to make informed decisions, evaluate their financial goals and risk appetite before committing to any financial instrument, including recurring deposits.

Summary

The article dives into the process of opening an online recurring deposit account in India. This guide is for those who have an existing internet/mobile baking account and are eager to establish a disciplined saving habit. The article explains how to navigate through your bank’s online portal, fill the RD form, use an RD calculator, and confirm the transaction. However, before investing, it’s crucial for the investor to gauge all the pros and cons of trading in the Indian financial market, including lower interest rates than mutual funds or the stock market, penalties on premature withdrawals, and tax implications. One should assess their financial objectives, risk profile, and potential returns through an RD calculator before choosing a recurring deposit as their preferred savings tool.