PremiumMUMBAI : Small finance banks not only offer higher interest rates on fixed deposits (FD), but also on recurring deposits (RD).
Recurring deposits allow individuals to invest a fixed amount every month, whereas in a fixed deposit, a person invests a lump sum at one go. Typically, small savers use RD as it allows even small amounts—as low as ₹100—to be saved every month.
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Premium Most small finance banks offer the highest rate on an RD of 36 months. Utkarsh Small Finance Bank, for example, provides the highest rate of 8% on an RD of 24-36 months.
High tenure RDs, between five and 10 years, have lower rates compared to other tenures for many small finance banks.
For other tenures, 12, 15, 18, 21, and 24 months, the bank offers 7.25% rates. The same rates are for RDs above three years and up to 10 years, according to its websites.
Jana Small Finance Bank and Suryoday Small Finance Bank offer their highest rate on RD for a tenure of 36-60 months and five years, respectively.
North East Small Finance Bank offers its highest rate of 7.50% on RD of two years.
Other small finance banks offer an interest rate of 6.5% and 7% on their RDs of various tenures.
Premium Premium When opening an RD with small finance banks do keep a few things in mind. All banks allow premature withdrawal, but with a 1% penalty.
You will need to sign up for a savings account for most banks if you want to open an RD account with them. The minimum tenure of RD, for most small finance banks, is six months, and the maximum is 10 years, and the minimum investment amount is ₹100.
Some small finance banks may have slightly different terms and conditions that you must know. AU Small Finance Bank Ltd, for example, on its website, states that “if frequent defaults (non-payments) are observed in monthly instalments, and three instalments fall in debts, the bank reserves the right to close the RD account".
Equitas Small Finance Bank has a minimum tenure of 12 months, and the minimum starting investment is ₹1,000. Fincare Small Finance Bank does not offer higher rates for senior citizens, according to its website, which most other banks do.
(Do you have personal finance queries? Send them to mintmoney@livemint.com and get them answered by industry experts.)
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