UCO RD – Eligibility, Features and Benefits

UCO Bank was previously known as United Commercial Bank. It was started by G.D. Birla, a revered figure in the Indian industrial context with its headquarters in Kolkata in 1942. It started its business with an initial capital of Rs 3 Crore – Rs 2 Crore issued, Rs 1 Crore paid-up.

It spread 14 branches across India immediately after its incorporation, and then more branches overseas post World War II.

Since its incorporation, UCO bank has had more than 4000 operating units across the world and almost 50 zonal office units across India.

They offer a host of deposit schemes which include UCO Monthly Income Scheme, Kuber Yojana, Recurring Deposits, etc.

UCO Bank Recurring Deposits, also known as the ‘UCO Swabhagya RD Scheme’, can be considered a low-risk investment option through which individuals can earn periodical interests.

Individuals with low to moderate disposable income can opt for recurring deposit investments to create a substantial corpus upon maturity. Such investments are required to be deposited monthly, and the interest on the same is compounded quarterly.

The application of compounding leads to significant growth of the invested capital. This investment instrument is safer and moderately profitable compared to other investment options as it offers the investor assurance of steady periodical returns on their investment without any attached risks to it.

Features of Recurring Deposits from UCO Bank

The features of UCO Bank RD are –

  1. Low initial investments: Accountholders who have opened their accounts post 1.3.16 will need to deposit a minimum amount of Rs 100 per month. This feature makes it easier for individuals with low disposable income to employ their capital to create substantial corpus post maturity.
  2. Lock-in period: Individuals need to keep their investments for a minimum of 1 year and a maximum of 5 years.
  3. Interest rates: Interest earned on the capital employed depends on the tenure of the UCO Bank RD scheme. Senior Citizens attract a slightly higher interest rate compared to citizens below 60 years of age.

If the lock-in period is 1 year, the interest rate applicable for the same is 6.6% for general citizens and 6.85% for senior citizens. Any period longer than that attracts an interest rate of 6.5% for general citizens and 7% for senior citizens.

The interest rate is reduced once it crosses the threshold of Rs 2 Crore. Interest on RD is calculated using the following formula – I = {P*n(n+1)r}/2400

Here, I is the Interest amount; P is the Principal amount deposited till such date; n is the number of months completed, and r is the Rate of Interest.

  1. Flexible Deposit amount: Individuals can opt to invest a higher amount as part of their monthly deposit obligation depending on his/her affordability. However, the deposit amount needs to be a multiple of Rs 100 and can extend up to Rs 1 Lakh.
  2. Eligible account holders: Individuals above the age of 18 can open a UCO Bank RD. A minor account can also be opened if the minor is above 10 years of age with minimum literacy to read and write.
  3. Penalty: An individual can also decide to withdraw their investments prematurely; however, in that case, he/she has to bear a penalty charge. UCO Bank charges a penalty of 2% less than the lower of the following – applicable interest rate on the date of redemption or the interest rate according to the period for which the deposit was held by the bank.

The following table demonstrates the interest rates on UCO Bank Recurring Deposit available to investors

Tenure Less than Rs 2 Crore Above Rs 2 Crore
General Citizen Senior Citizen
1 year 6.6% 6.85% 4.75%
2 years 6.5% 7% 4.75%
3 years 6.5% 7% 4.75%
4 years 6.5% 7% 4.75%
5 years 6.5% 7% 4.75%

Maturity Value Calculation

Like many other financial institutions and NBFCs, UCO Bank provides investors with information on the corpus amount they will be earning depending on the monthly investment and lock-in period of the deposit.

It helps the investors make an informed decision regarding their investment and the period for which they should keep their principal invested.

Maturity value is calculated using the following formula is –

P x n[1 + {(n+1)r}/2400]

Here, P is the total principal amount deposited

n is the number of years in months

r is the applicable rate of interest

Suppose Ramesh has invested Rs. 10 Lakh in a UCO Bank RD for 5 years and the applicable interest rate is 6.5%. Then the maturity amount will be –

10, 00000 x 60[1 + {(60+1)6.5}/2400] = 397.5/2400 = Rs.11, 83133.

Eligibility Criteria for UCO Bank Recurring Deposit

The following are the entities that can open a recurring deposit account with UCO Bank –

  • A residential Indian.
  • Two or more individuals can open an account jointly, each holding similar rights over the account.
  • Minors above the age of 10 years, represented by their legal guardians.
  • Institutions which are registered and joint companies.

In the case of jointly held accounts, each holder is the beneficiary for the other. It means, in case of the demise of one individual, the other becomes the legal nominee.

Benefits of UCO Recurring Deposit

  1. Compound Interest: Interest on recurring deposit is compounded quarterly. Therefore, it accumulates a significant amount upon maturity.
  2. Loan against RD: You can avail a loan against your RD. The loan amount granted will be a maximum of 90% of the amount received upon maturity.

Tax implications on UCO Bank Recurring Deposit

  • Interest earned from Recurring Deposit is taxable under the head “Income from other sources” during tax filing.
  • There are no exemptions on the interest amount.
  • TDS is deducted on interest if the total interest amount earned in a year exceeds Rs. 10,000.

Depending on your affordability, a recurring deposit is a viable starting point for exercising your available capital.

You can use the maturity amount to reinvest in high-profit yielding investment options such as equity funds, hybrid funds, stocks, debt funds, etc. In case you have a low-risk appetite, you can opt for hybrid funds or debt funds, or a Monthly Income Scheme.