What is Recurring Deposit Account ? Meaning ↓
Recurring deposit account is generally opened for a purpose to be served at a future date. Generally opened to finance pre-planned future purposes like, wedding expenses of daughter, purchase of costly items like land, luxury car, refrigerator or air conditioner, etc.
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Recurring deposit account is opened by those who want to save regularly for a certain period of time and earn a higher interest rate.
In recurring deposit account certain fixed amount is accepted every month for a specified period and the total amount is repaid with interest at the end of the particular fixed period.
Features of Recurring Deposit Account ↓
The main features of recurring deposit account are as follows:-
- The main objective of recurring deposit account is to develop regular savings habit among the public.
- In India, minimum amount that can be deposited is Rs.10 at regular intervals.
- The period of deposit is minimum six months and maximum ten years.
- The rate of interest is higher.
- No withdrawals are allowed. However, the bank may allow to close the account before the maturity period.
- The bank provides the loan facility. The loan can be given upto 75% of the amount standing to the credit of the account holder.
Advantage of Recurring Deposit Account ↓
The advantages of recurring deposit account are as follows:-
- Recurring deposit encourages regular savings habit among the people.
- Recurring deposit account holder can get a loan facility.
- The bank can utilise such funds for lending to businessmen.
- The bank may also invest such funds in profitable areas.
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