A recurring deposit (RD) account is a type of financial product offered by banks and financial institutions. It is a systematic savings plan that allows individuals to deposit a fixed amount of money at regular intervals (usually monthly) for a predetermined period. The RD account encourages disciplined savings and typically offers a fixed interest rate.
Here's how an RD account typically works:
1. Deposit: You need to deposit a fixed amount of money into your RD account regularly. The amount and frequency of deposits are predetermined when you open the account.
2. Tenure: The RD account has a specific tenure or duration, which can range from a few months to several years. This tenure is also determined when you open the account.
3. Interest: RD accounts offer a fixed interest rate that is determined by the bank or financial institution. The interest rate remains constant throughout the tenure of the account.
4. Maturity: At the end of the tenure, the RD account matures, and you receive the principal amount along with the accumulated interest.
5.Premature withdrawal: In some cases, you may be allowed to prematurely withdraw funds from the RD account. However, this may be subject to certain penalties or a reduction in interest rate.
RD accounts are popular among individuals who want to save for specific goals, such as purchasing a vehicle, funding a vacation, or building an emergency fund. They provide a convenient way to accumulate savings gradually over time while earning interest on the deposited amount.
