Get started with minimum investment on recurring deposit

What if someone tells you that investments are cheaper than the movie show in your nearby multiplex? Investments are the pathway to attaining financial freedom and creating generational wealth. However, there is a misconception among people that you can invest only when you have huge, idle funds lying somewhere. What most people don’t know is that you can begin investment with an amount as small as Rs. 100. If you are wondering how, then read on to know more about recurring deposits. Here’s a guide to understanding what recurring deposits are and why they should be a part of every investor’s portfolio.

What Are Recurring Deposits?

Recurring deposits are the schemes offered by banks and other financial institutions wherein a predefined amount is invested in the recurring deposit account for a specified tenure. They are some of the best investment tools available in the market that have been instrumental in reducing portfolio risk while providing adequate returns at the same time. It encapsulates the features of both SIP investment and fixed deposits that make it a lucrative option for investors. It is similar to Systematic Investment Plan where a fixed amount is invested each month in a specified plan. However, while SIP can be continued for as long as the investors want, recurring deposits have a fixed tenure like fixed deposits.

Features of Recurring Deposits

1. 1. Minimum Investment:

This is the biggest flex of recurring deposits,the minimum installment for RDcan be started with as low as Rs. 100 for some banks and financial institutions. This increases its reach to more people, especially encompassing students and those who are new to investment and can’t allocate a larger amount for savings. There is no maximum limit to the amount of investment that can be made in your RD account.

1. 2. Rate of Interest:

Recurring deposits offer an attractive rate of interest that is even better than fixed deposit interest rates offered by most financial institutions. RD interest rates range between 5% and 8%.

1. 3. Risk

Recurring deposits are some of the least risky investments. As the funds are not further invested in market-linked instruments, they do not pose risk to investors. The risk level is similar to that in fixed deposits.

1. 4. Lock-in period:

Recurring deposits are locked in for the tenure of investment. In most cases, it is not allowable to withdraw for the minimum lock-in period. After that, the financial institutions allow pre-withdrawal, subject to penalty. Therefore, it is beneficial to hold the investments till maturity.

Benefits of Recurring Deposits

Recurring deposits offer the following benefits to its investors:

1. 1. Disciplined Investing:

Recurring Deposits inculcate saving habits in investors. As the amount gets regularly invested each month, investors adopt a disciplined approach towards investing.

1. 2. Minors Eligibility:

Recurring deposits can be started in the name of minors as well. Such a minor shall be represented by his/her natural/legal guardian and the application form shall bear the sign of natural/legal guardian on behalf of the minor.

1. 3. Good returns at minimum risk:

Recurring deposits offer good returns at minimum risk. About 8% returns at minimum risk are something that only a handful of instruments can provide.

Recurring Deposits Calculator

If you want to know the maturity value of your recurring deposits, then you can learn about the same using the recurring deposit calculator. You need to enter your monthly investment amount and the tenure of investment. The RD calculator will provide an approximate idea of your maturity value to help you make an informed investment decision.

Shriram Finance Recurring Deposit

Shriram Finance offers the best terms to its investors when it comes to investing in recurring deposits. Following are the benefits of investing in the Shriram Finance Recurring Deposits Plan :

1. 1. Rate of Interest:

While interest rates on recurring deposits go up to 8%, Shriram Finance took it a step ahead to offer the highest interest rate for recurring deposits,at an 8.50%* p.a. interest rate per annum for a tenure of 60 months. Such returns are better than what is offered by most government schemes and instruments.

1. 2. Flexible Payout:

At the time of maturity, Shriram Finance Recurring Deposit planoffers flexible payouts at the disposal of investors. Two options are provided to investors, such as:

• Auto Refund: Here, the maturity value gets transferred to the investor’s bank account. This is a good option for those investors who have financial commitments at the time of maturity like marriage, education, etc.

• Conversion to FD: Here, your maturity value gets converted to fixed deposits. This is a beneficial option for those investors who do not have any upcoming financial obligations and prefer to stay invested for a prolonged period. The deposits will get auto-renewed as per the instructions on the application form.

• Flexible Premature Withdrawal: While premature withdrawal is restricted in most recurring deposits,Shriram Finance provides flexibility to investors for such withdrawals. There is a lock-in period for the first three months where withdrawal is allowed only in case of the death of the depositor. Withdrawals after three months’ time, but before six months, are allowed, but no interest will be paid to the depositor. Withdrawals after six months but before maturity are subject to the condition that the interest rate will be reduced by 2% or 3%, as the case may be.

Shriram Finance RD Minimum Investment

The minimum amount to invest in Shriram Finance recurring deposits is Rs. 500 per month and in multiples thereof, which ensures a sufficient allocation towards savings and investments from your monthly budget. The only documents required to begin your investments are:

1. 1. ID Proof (Self-attested)

1. 2. Address Proof (Self-attested)

1. 3. Photographs

1. 4. Cancelled Cheque

Bottom Line

Recurring deposits can be a great start to your investment journey if you are a novice investor. Apart from attractive returns, it ensures the safety of your capital invested. If you already have a portfolio of securities, then you can use recurring deposits to reduce your overall portfolio risk, helping you to ensure guaranteed returns apart from market gains.