Flexi Recurring Deposit: Meaning, Benefits, Features, and More
A Recurring Deposit (RD) scheme allows you to deposit a certain amount in an RD account every month for a predetermined tenure. There are two types of RD accounts. A conventional RD account involves depositing a fixed amount on a specified date every month. On the other hand, a Flexi RD account provides flexibility regarding the deposit date and amount. This flexibility is what differentiates a regular RD account from a Flexi RD account.
A Flexi RD account consists of two sections – the core amount and the flexible amount. The core amount is the lump sum deposit made by you at the time of account opening. On the other hand, the flexible amount refers to the instalments deposited at your convenience.
With a Flexi recurring deposit, you can enjoy a higher and better interest rate than a savings account. Although instalments are flexible, you must adhere to specific terms and conditions while operating a flexible RD account. In this article, we will explore what Flexi RD is along with its benefits and features.
What is Flexi RD?
Flexi Recurring Deposit (RD) is an RD scheme that allows you to deposit instalments at your convenience. While opening a Flexi RD account, you must choose a core amount for a specific period. After that, you can deposit funds in any number of monthly instalments. There are no extra charges on the date of these additional instalments.
The tenure and interest rate of a Flexi RD account varies from bank to bank. Based on the minimum and maximum caps set by the bank on the instalment per financial year, you can increase or decrease the amount of the instalment. The interest rate on the core amount is as per applicable rates for the account’s tenure. On the other hand, the flexible instalments will carry a rate of interest from the date of deposit. The rate offered to senior citizens is higher.
If you don’t have a fixed monthly income, a Flexi RD would be an excellent choice as it allows you to make deposits of varying amounts at your convenience.
Flexible Recurring Deposit Scheme: Benefits & Features
There are numerous benefits and features of Flexi RD schemes. Let us look at them one by one.
Flexibility in deposits
Once you deposit the core amount, the additional amount can be deposited as per the availability of funds on later dates. There is a cap on the maximum instalment amount and frequency as per the bank’s terms and conditions. Moreover, multiple deposits within a single month are also allowed.
Freedom to Choose the Investment Tenure
You can select the investment tenure based on your financial goals. If you are investing a part of your earnings for, say, buying a new car next year, you can choose a tenure of 12 months. The minimum and maximum tenure vary from bank to bank. While some banks allow a tenure of 12 months, others, such as the SBI, have set the minimum tenure at five years (60 months).
Variable Rate of Interest
The rate of interest is decided based on the tenure and the core amount. On top of that, the interest rate on additional instalments depends upon the date of deposit. The rate varies from one bank to the other and is higher for senior citizens.
Premature Closure Allowed
Suppose you need funds urgently to overcome an unplanned financial emergency. In that case, you can prematurely close your Flexi RD account. Some banks, such as ICICI Bank, offer a rate of interest based on the duration for which you make deposits in your account. While some others, such as SBI, offer a rate of interest 0.5% lower than the rate of interest applicable for the duration you made deposits in your account. In a nutshell, you can withdraw the accumulated corpus from the Flexi RD account prematurely if required..
Collateral for Loans
You can avail loans against the accumulated balance in your Flexi RD account. Based on the terms and conditions of the banks, you can use a part of the total balance as the loan amount. Most of the banks charge an interest rate of 1% higher than the deposit rate, for short-term you can take the loan at cheaper rate compared with personal loans rate.
No Penalty for Skipping Instalments
Some banks, such as ICICI Bank, do not levy any penalty if you are unable to deposit an instalment due to unfortunate and unavoidable circumstances. However, before opening an account, you must check the terms related to penalty charges for missing instalments.
Banks Offering Flexi RD Schemes
Almost every bank offers Flexi RD schemes. However, the interest rate, investment tenure, and caps on the minimum and maximum limits vary across banks. Let us look at Flexi RD schemes offered by two leading banks.
ICICI Bank Flexi RD
Under the iWish flexible RD scheme of ICICI Bank, you have the flexibility to deposit the desired instalments on any date of the month. Moreover, it does not levy any penalty on skipping the instalment. You can deposit instalments any number of times in a month. The interest rate varies from 3.50% to 5.35% based on the tenure. The minimum initial deposit amount is Rs. 50.
SBI Flexi RD
SBI flexi RD account allows you to choose the instalment within the minimum and maximum caps per financial year. The minimum deposit to be made per financial year is Rs. 5,000, and the maximum deposit is Rs. 50,000. The minimum investment tenure is five years, and the maximum is seven years. SBI levies a penalty fee skipping an instalment.
Opening a Flexi Recurring Deposit account is a beneficial investment option for individuals having a varying monthly income. Flexibility in instalments, premature closure, freedom to skip an instalment, and a higher interest rate than a savings account are significant benefits for which you may consider opening a Flexi RD account. Moreover, based on your financial goals, you can select the investment tenure and get a lump sum upon maturity.
FAQs about Flexi Recurring Deposit
What is the significant difference between a regular RD account and a Flexi RD account?
In a regular RD account, you must deposit a fixed instalment on the predetermined date for the selected investment tenure. However, in a Flexi RD account, you can have flexibility regarding instalments amount and frequency. Some banks need you to submit the core amount on a predetermined date in the Flexi RD account, while some offer flexibility in deposit frequency.
What is the rate of interest for a Flexi RD scheme?
The rate of interest varies from bank to bank. Moreover, it is based on the core amount and tenure. However, the rate of interest on additional instalments depends on the date of deposit. Furthermore, the interest rate is higher for senior citizens.
Is the nomination facility available while opening a Flexi RD account? If yes, can I change the nominee afterwards?
Yes, the nomination facility is available while opening a Flexi RD account. You can also change the nominee afterwards. While some banks allow you to change nominations online, some others, such as SBI, ask you to visit the branch to complete the process.
Is an auto-renewal facility available for Flexi RD accounts?
Yes, many banks provide auto-renewal facilities for Flexi RD accounts.
Do I need to pay the penalty for skipping an instalment in my Flexi RD account?
This varies from bank to bank. You need to check the terms and conditions related to the penalty for skipping an installment. ICICI bank does not charge any penalty for missing an installment, while SBI charges a penalty of Rs. 50 per financial year.