Fixed deposit :
A fixed deposit (FD) is a financial instrument provided by banks which provides investors with a higher rate of interest than a regular savings account, until the given maturity date. It may or may not require the creation of a separate account.
Recurring deposit :
Recurring Deposit is a special kind of Term Deposit offered by banks in India which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits. It is similar to making FDs of a certain amount in monthly installments, for example ₹ 1000 every month. This deposit matures on a specific date in the future along with all the deposits made every month. Thus, Recurring Deposit schemes allow customers with an opportunity to build up their savings through regular monthly deposits of fixed sum over a fixed period of time. Minimum Period of RD is 6 months and maximum is 10 years.
Renewals and withdrawals of Fixed Deposit Accounts :
1) Rolling over of deposits for another term where term, in which the tenure can differ.
2) Deposits can be encashed at maturity.
3) Premature withdrawals are subject to penalties.
4) Amounts being withdrawn above Rs.20,000 must be transferred to the depositors savings bank account.
5) Amounts being withdrawn below Rs.20,000 can be taken in cash.
6) No withdrawals are allowed for a minimum of 5 years in the case of tax-saving deposits.
Renewals and withdrawals of Recurring Deposit Accounts :
1) During the premature closure of the RD for reinvestment in a term deposit, interest will be paid to the account holder
without reducing interest rate by 1% (as penalty).
2) If the account holder does not stay with the bank after prematurely closing the account, the interest rate will be
(whatever the interest rate was, minus 1% as penalty).
3) Partial withdrawals are not allowed for RDs, but some banks offer a loan facility against the RD, where the RD must be
pledged as collateral.
4) Premature withdrawals are possible, but the rate of interest will be less than the base rate (which is around 8.40%).