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RD ALTERNATIVE

Indian Overseas Bank (IOB) is a public sector bank with headquarters in Chennai. The bank ranked 7th in the EASE Reforms for Public Sector Banks 2019 – a joint report prepared by the Boston Consulting Group and Indian Banks’ Association.

Under its term deposit schemes, the bank offers more than 15 products, of which recurring deposits provide worthwhile returns. Depositors can use an IOB RD calculator to ascertain the returns earned from opening such accounts.

The Indian Overseas Bank RD calculator is an online tool that is useful for calculating the maturity value of a recurring deposit based on the invested amount, rate of interest, deposit tenure. It is free to use and shows the results instantly upon entering the values.

An IOB RD scheme can be availed by any individual irrespective of their occupation or income. The minimum amount required to open an RD account is Rs.50.

The rate of interests for IOB Recurring Deposits for general customers and senior citizens as of 14th May 2020 are listed below –

Period |
For general customers |
For senior citizen |

180 days to 269 days | 5.75% | 6.25% |

270 days to 364 days | 6.25% | 6.75% |

1 year to 1 year 364 days | 6.60% | 7.10% |

2 years to 2 years 364 days | 6.75% | 7.25% |

3 years to 10 years | 6.80% | 7.30% |

Interest on a recurring deposit account with IOB is compounded every quarter. Meaning, deposit holders will earn interest every 3rd month from the time of deposit and 4 times in a year.

Individuals holding an RD account can use the IOB RD interest rates calculator to determine their returns. The formula used by this calculator is mentioned below –

**M = R x {(1 + n) x n – 1} / 1- (1 + i) ****(-1/3)**

Here,

- M is the maturity amount.
- n is the number of quarters within the deposit period.
- R is the amount deposited in the RD.
- i is the rate of interest divided by 400 (owing to 4 quarters).

*Consider the following example to understand the formula better:*

*Mr. Amol is aged 54 and resides in Guwahati. He opens an RD account with IOB and deposits Rs.5,000 every month for 4 years. As per the table illustrated above, he will earn a rate of interest of 6.80%.*

Here,

- n = 16 (4 years x 4).
- R = Rs.5,000.
- i = 0.017 (6.80 / 400).

Now, when placed in the formula –

M = 5,000 x {(1 + 16) x 16 – 1} / 1- (1 + 0.017) (-1/3)

Hence, M = Rs.276,418.

So, Mr. Amol will receive Rs.2,76,418 when he invests Rs.5,000 every month for 4 years at a rate of interest of 6.80%.

If Mr. Amol was a senior citizen, his maturity amount would have been Rs.2,79,431 as per an applicable rate of interest of 7.30%.

As manual calculations can be subject to errors and can be time-consuming, individuals can use an IOB Recurring Deposit calculator to know their RD maturity amount**.**

Some of the factors that influence the rate of interest on an IOB RD are –

**Deposit tenure**

The primary factor that affects RD interest rates is the deposit tenure or maturity period. Longer periods invite higher rates and vice versa. From the table listed above, the rate for depositing for 1 year to 1 year 364 days is 6.60% while that of 3 years to 10 years is 6.80%.

**Age of the depositor**

The second factor that impacts the rates of interest is the depositor’s age. Senior citizens will earn 0.5% additional interest compared to other customers.

**Reverse repo rate**

The last factor is the reverse repo rate, one of the instruments of monetary policies of the Reserve Bank of India (RBI). The RBI borrows money from the commercial banks (like IOB) and pays them interest as per the reverse repo rate. If this rate is high, banks will earn more interest on the deposits and, in turn, increase the rate of interest on their term deposits (like recurring deposits).

Advantages of using an IOB Bank RD calculator are –

- Provides accurate results.
- Calculations do not require much hassle.
- Generates results promptly.
- Enables users to determine the amount and tenor of deposit.

Worthy to remember, individuals opening a recurring deposit with the Indian Overseas Bank can use an IOB RD Calculator to have a broad understanding of their investment prospects in advance.

**Ques**. Who can apply for an RD account?

**Ans**. Indian residents and Hindu Undivided Families (HUF) can open an RD account with Indian Overseas Bank.

**Ques**. Is nomination facility available on recurring deposit accounts offered by Indian Overseas Bank?

**Ans**. Indian Overseas, nomination facility is available. One thing to note here is only one nominee per account is allowed.

**Ques**. Is Partial withdrawal allowed in Indian Overseas Bank Bank RD accounts?

**Ans**. No, Indian Overseas Bank Bank doesn’t allow Partial withdrawal of recurring deposit.

**Ques**. What happens on maturity of the Indian Overseas RD account?

**Ans**. Once the Indian Overseas Bank RD matures, the principal amount and the accumulated interest can be transferred directly into a linked savings account. One more option is to invest the maturity amount in fixed deposits.

**Ques**. Will TDS be deducted from IOB RD if I submit form 15G/15H?

**Ans**. No, TDS will be deducted if you submit form 15G/15H as applicable.

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