Indian Bank RD – Variable & Swarna Nidhi Recurring Deposit

Indian Bank, with its headquarters in Chennai, is one of the top-performing public sector banks in the country. As per the bank merger announcement made by Hon’ble Finance Minister Ms. Nirmala Sitharaman in August 2019, Indian Bank will serve as an anchor bank for Allahabad Bank from April 2020.

With this merger, Indian Bank will reach 7th place in the list of largest banks in the country.

The Indian Bank, apart from being a top performer in the banking sector, is also known for its lucrative scheme offers. One such term deposit scheme offered by the bank is a recurring deposit, which allows individuals to build a savings corpus by investing a fixed portion of their monthly income for a pre-specified period.

The Indian Bank RD is one of the most convenient options for first-time investors with low-risk tolerance.

Especially with the bank’s Swarna Nidhi Recurring Deposit and Variable Recurring Deposit options, individuals can maximize their benefits from Recurring Deposits.

The following are the features, interest rates, tax implications and other crucial information related to Indian Bank RD schemes.

Variable Recurring Deposit –

As its name suggests, individuals can choose to deposit amounts according to their convenience as long as they adhere to the minimum and maximum investment limit amount allowed.

For example, individuals can choose to open an account with a minimum deposit of Rs. 25 with the maximum amount limit for the first deposit set at Rs. 1 Lakh. Therefore, they can choose to invest any amount between Rs. 25 and Rs. 1 Lakh in their account in multiples of Rs. 25 as their first deposit amount.

Also, since there is no fixed rate for this particular Indian Bank RD Scheme, the installment amount an individual pays for each month can vary.

This scheme caters to the requirements of those who can afford to contribute a certain small portion of their income each month instead of making lump-sum deposits.

The interest rate on this scheme is applied in accordance with the RD rates offered by Indian Bank.

Following is a table illustrating the key features of a Variable Recurring Deposit account –

Topics Particulars
Minimum deposit amount allowed Rs. 25 per month
Maximum deposit amount allowed Rs. 1 Lakh per month
Tenure for the RD Ranges between 1 year and 10 years
Applicable interest rates 6.75%-6.9% (is subject to change at the bank’s discretion); senior citizens do not have any additional benefits on interest rates.
Premature withdrawal Not allowed
Late payment penalty charges Not applicable

The interest on the deposit is compounded quarterly on the minimum account balance maintained between the period of 10th of every month and the last day of the month.

The following table illustrates the interest rates applicable to Indian Bank RD Scheme (October 2019) –

On deposit of less than Rs. 2 Crore (in % per annum) On deposit of more than Rs. 2 Crore (Rs. 2-5 Crores) (in % per annum)
Tenure For individuals below 60 years For senior citizens For individuals below 60 years For senior citizens
180 days 6.5 7 6.25 6.75
181 days to < 9 months 6.5 7 6.25 6.75
9 months to < 1 year 6.5 7 6.25 6.75
1 year 6.75 7.25 6.5 7
>1 year to < 2 years 6.6 7.1 6.35 6.85
2 years to < 3 years 6.5 7 6.25 6.75
3 years to < 5 years 6.75 7.25 6.5 7
5 years 6.9 7.4 6.65 7.25
>5 years 6.5 7 5.5 6

For example, if Mr. Singh opens a recurring deposit account by depositing Rs. 100 per month and continues to deposit regularly over a period of 16 months, his account will attract an interest rate of 6.6% per annum.

The interest amount on his account can be derived by the equation –

I = P x n (n+1) r/2400,

Where I is the interest, P is the principal amount deposited each month, n is the number of months, and r is the rate of interest.

According to the formula above, Mr. Singh will accumulate a maturity amount of Rs. 1,677 on his RD.

Swarna Nidhi Recurring Deposit –

The Swarna Nidhi Recurring Deposit or Variable Recurring Deposit scheme offers account holders with an option to purchase a gold coin against their deposit amount after their account matures. The deposit tenure for this scheme ranges between 6 months and 36 months.

Like Variable RD, the Swarna Nidhi deposit also offers flexibility concerning the deposit tenure and amount. However, for the Swarna Nidhi account, individuals have to deposit a minimum amount of Rs. 500 per month with the maximum limit for deposit set at Rs. 10 Lakh per month.

Following is a table illustrating the interest rates applicable on Swarna Nidhi Recurring Deposits –

Tenure For deposit amount of less than Rs. 1 Crore (% per annum) On deposits ranging between Rs. 1 Crore and Rs. 5 Crores (% per annum)
From 6 months up to 9 months 7 6.75
From 9 months to < 1 year 7.25 6.75
Between 1 year and 2 years 7.25 6.75
Between 2 years and 3 years 7.25 6.75
> 3 years 7 6.50

The rate of interest on the Indian Bank Recurring Deposit scheme allows individuals to earn a substantial corpus on their deposited amount.

However, RD levies certain restrictions that do not allow individuals to maximise their returns from the investments.

Other investment options, like Mutual Funds, for instance, are much more financially rewarding than RDs.

Mutual Funds allow investors to avail maximum benefits from investing in equity and debt-oriented funds, depending on their risk tolerance.

Tax implications on Indian Bank RD Scheme –

Like other RD accounts, Indian Bank RD also attracts taxes under the Income Tax Act, 1961. The amount invested in the RD is included in the individual’s income, and a TDS of 10% is applicable on the interest earned if the amount earned is more than Rs. 10,000/year.

However, individuals can opt to save the TDS on their interest from RD by filing either Form 15G or 15H. Thus, with these few Indian Bank RD details in mind, one can start their term deposit account and enjoy attractive benefits.