Recurring deposit

Is recurring deposit a good idea

Recurring deposit in banks?

If yes then it depends on your requirements. If you need liquidity, wish to protect your capital and plan out your fixed expenses it’s a good idea.

I use RD’s to plan for my insurances and fixed recurring expenses. I don’t look at them as investment since the ROI is low.

If you’re looking in terms of ROI then MF’s, equities etc is the better option.

1 Like

Recurring deposit is a great safe investment idea when the interest rate regime is high. You should book RD only when the rates in the market are high and not at the current time as the rates are low. This is because once you book the RD, the bank is bound by the rate and will have to give you the rate until its maturity.

Example : 3 to 4 years back, banks were offering 8 to 8.5% on FD and RDs. If you had booked a RD say for 50,000 per month for 10 years then, for each and every incremental deposits you make even today, the bank will have to pay the same rate of 8 or 8.5 as per original contract.

Hence RD is great when the interest rate has peaked and showing downward slope. If you book then you are hedged for the interest rate for subsequent savings.

At the same time, do not book RD when the rates are low, as you will be locked in for this rate and when the rates increase, you will not get the benefit.

You will understand the true meaning of compounding in RD.

In my view, the benefit of RD is always seen for long term and not for short term RDs.

1 Like

I agree RD teaches you the true meaning of compounding but it’s still low compared to other asset classes. I found this on Nikhil Kamath’s twitter.

Yeah, it’s a good choice for low risks and safe investments.