What Is A Recurring Deposit Account

Are you looking for an investment plan? If yes, we have good news for you. Have you heard of Recurring Deposit Account? I am sure most of you have heard about it, but have paid little attention to it.

We all know banks are evolving every year. Banks are coming up with new schemes every year if not every month. A recurring deposit account is also one such scheme.

A recurring deposit account is similar to a fixed deposit account. The only difference is, in a fixed deposit account, customer deposit a fixed amount for a fixed period. Whereas in a recurring deposit account, customer deposit fixed amounts in installment for a long period.

If you are looking to develop the habit of saving, Recurring Deposit also known as RD is for you. It’s one unique investment tool that allows you to make a regular deposit and earn decent returns on the investment. The deposit interval could be daily, weekly, or monthly.

Not all banks in Nepal offer recurring deposit account, but some major banks such as Sunrise bank, NIC ASIA Bank, Everest Bank, Himalayan Bank have recurring deposit scheme. The term often ranges between 6 months to 10 years depending on banks.

Recurring deposit account gives investors/customers a wide range of terms to choose from which again varies from bank to bank.

It doesn’t matter what term the customer enrolls for. On maturity, the customer will receive the total investment amount and the interest rate.

Features of Recurring Deposit Account

Like any other account, the Recurring Deposit account also has its features which makes it unique from the rest of the scheme.

One excellent feature of the recurring deposit is, it offers a fixed interest on the amount you have invested.

Here are some unique features of recurring deposit accounts.

1. Recurring deposits encourage regular saving habits.
2. The deposit period starts with 6 months at the least and can last up to 10 years.
3. The rate of interest is equal to fixed deposit accounts which are higher than any other saving scheme.
4. Depending on which country or city you live in, the deposit amount can vary from bank to bank. The deposit amount can minimum of Rs. 100 and maximum as you can.
5. Another outstanding feature of a recurring deposit account is, you can avail loan by using your deposit as security. Most of the banks offer about 70% to 90% of the deposit amount as loans to customers.
6. For fixed deposit account customers are not allowed premature and mid-term withdrawal. Whereas for recurring deposit accounts some banks allow customers to withdraw funds before the maturity period in case of emergency.
7. Another best part about recurring deposit account is customer can directly link their saving, current or salary account to recurring account. Bank can credit the recurring account from the linked accounts.
8. Banks provide investors with assured returns as they are not tied to the market movements.
9. All the recurring deposits you make mature on the same day. No matter what the market condition is, recurring deposit investment will continue to earn interest.
10. A recurring deposit has a fixed monthly investment, fixed duration, and fixed rate of interest.

The above mention points are some features of a recurring deposit account that make it stand out from the rest of the saving scheme. Different banks might have different norms but the fundamental features remain the same in all banks.

Eligibility for Recurring Deposit Account

Now, let’s talk about the eligibility of a recurring deposit account. Like any other account, anybody can open a recurring deposit account. But as mention earlier, each bank has its norm and rules they run by.

Not all banks offer the same interest rate or account creation procedure.

Here are some important eligibility criteria that you should undergo to open a recurring deposit account in any bank.

1. Any individual can open a recurring deposit account as long as a person can provide ID proof. To open an account for a minor he/she should be above the age of 10.
2. Minor below the age of 10 can open an account only under legal guardianship.
3. Any corporate, commercial organization, company, proprietorship, or government organization can open a recurring deposit for their employees or for the organization itself. 

Documents Needed for Recurring Deposit Account

Like any other account, the recurring deposit account also needs some documents to process the account. The document that you need to submit is the same as you would submit for a regular saving account.

These are the documents you need to submit while opening a recurring account.

1. You will need to submit a filled-out application form. You will get an application form from the bank you select to open a recurring account.
2. Passport size photos.
3. Identity proof that has your address on it.
4. Some banks might ask you for your monthly salary details statements.

These are all the documents you need to open a recurring deposit account. The document criteria might vary from bank to bank but these are the basic document you will need in any bank.

Some banks allow opening a recurring deposit account only to those applicants who already have a saving account with them. So, make sure you do thorough research about the bank. 

Comparison Between Banks

As we all know, each bank has its own sets of rules and format. Before you open a recurring account in any bank. It’s always a good idea to compare banks for more benefits.

Here is a comparison between Sunrise Bank, NIC ASIA Bank, Everest Bank, and Himalayan Bank. 

Sl.no	Comparison	Sunrise Bank	NIC ASIA Bank	Everest Bank	Himalayan Bank
1.	Minimum Monthly Deposit.	NPR 1000	NPR 500	NPR 100	NPR 1000
2.	Maximum Monthly Deposit	No Limit	No Limit	No Limit	No Limit
3.	Mode of Deposit	Mobile Banking and Counter Deposit	Counter Deposit	Counter Deposit	Counter Deposit
4.	Tenure	1 to 5 Years.	3 Months to 10 Year.	1 to 10 Years.	Minimum 3 Years.
5.	Interest Rate	As per FD rate	9.25 Per annum	As per FD rate	7.25
6.	Loan Facility	90% of the total deposit amount	90% of the total deposit amount	90% of the total deposit amount	90% of the total deposit amount

These were some basic comparisons between the 4 Nepali banks. But there are more banks that provide recurring deposit facilities. In terms of facility and goodwill, the banks mentioned above are the most reputed banks for recurring accounts.

Conclusion

A recurring deposit account is a good investment plan. Life is uncertain, nobody knows what is ahead of time. Getting into the habit of saving money through recurring deposit not only encourage saving but also gives you security from an unwanted incident that might happen.

It doesn’t matter, be it a minor, an adult, a working woman, or a busy entrepreneur. Every individual could take advantage of recurring deposits to secure the future.