HDFC Bank Recurring Deposit

HDFC Bank RD – Interest Rate, Eligibility & Features

HDFC is the largest private bank in India in terms of market capitalisation and the largest lender with respect to assets held. It offers a host of depository services such as HDFC Recurring Deposit, Fixed Deposits alongside basic services such as savings account, current account, etc.

Recurring Deposit is a fixed income monthly deposit scheme which allows investors to earn steady returns on investment.

Individuals who have a recurring deposit account are liable to pay monthly installments in their respective RD account. Interest on recurring deposits is compounded and calculated quarterly.

HDFC Recurring Deposit has a minimum lock-in period of 6 months and a maximum of 10 years. Because of compounding, a longer tenure ensures a substantial increase of the principal amount.

Because of the low bar for investments, individuals can easily employ a portion of their disposable income to ensure wealth creation. It provides individuals with the opportunity to profitably channelize their funds without bearing any risk for the same.

Also, in case of HDFC RD, the interest rates are similar to their Fixed Deposit interest rates, therefore making it much more lucrative compared to other recurring deposit schemes.

Interest Rate for Recurring Deposits

Interest rates vary across different tenures. Senior citizens enjoy a higher rate of interest compared to general citizens.

In case of HDFC Recurring Deposit, this percentage is higher by 0.5% across all tenures. In case an individual withdraws his/her investment before one month, the bank is not liable to pay any interest on the investment.

HDFC also offers recurring deposit facility to NRIs. For them, the minimum lock-in period is 12 months. Therefore, if an NRI individual withdraws before 1 year, the bank shall not pay any interest.

A few different interest rates available to general citizens, senior citizens, and NRIs for different tenures are listed below –

  1. Indian citizens below the age of 60 years and NRIs alike can earn interest of up to 7%, if he/she opts for a lock-in period of 27 months or 2 years 3 months and 3 years.
  2. The highest interest rate available to a senior citizen is 7.5% with deposit tenure of 2 years 3 months and 3 years.
  3. The shortest tenure available to general citizens and senior citizens is 6 months. Consequently, these terms attract the lowest interest rates of 5.65% and 6.15%.
  4. The lowest interest rate for NRIs for a tenure of 1 year or 12 months is 6.6%.

The following table lays down in detail the interest rates applicable on HDFC Recurring Deposit available to general and senior citizens.

Lock-in Period Interest Rate for General Citizens Interest Rate for Senior Citizens
6 months 5.65% 6.15%
9 months 6.25% 6.75%
12 months 6.6% 7.1%
15 months 6.6% 7.1%
24 months 6.6% 7.1%
27 months 7% 7.5%
36 months 7% 7.5%
39 months 6.9% 7.4%
48 months 6.9% 7.4%
60 months 6.9% 7.4%
90 months 6.9% 7.4%
120 months 6.9% 7.4%

Note: These rates are subject to change as per the bank’s discretion

The following table illustrates the different interest rates available to NRIs

Lock-in period Interest Rates
12 months 6.6%
15 months 6.6%
24 months 6.6%
27 months 7%
36 months 7%
39 months 6.9%
48 months 6.9%
60 months 6.9%
90 months 6.9%
120 months 6.9%

Note: These rates are subject to revisions as per the bank’s discretion.

The formula for calculating interest on Recurring Deposit is I = {P*n (n+1) r}/2400

Here, I is Total Interest Amount

P is Principal Amount

n is the tenure in months

r is the applicable rate of interest

For example, Ms. Anita, who lives in Houston, USA, opens an RD account with HDFC for 3 years with a monthly deposit of Rs. 1000. The applicable interest rate on her RD is 7%. In that case, her interest amount upon maturity is Rs. 4,137. The total maturity amount she will receive is Rs. 40137.

Other Financial Instruments

However, interest rates on Recurring Deposits are lower compared to other financial instruments. In case you have the appetite for a higher rate of return, then you should consider either market-linked investment options such as equity shares, equity funds or other fixed income options such as government bonds, bills, debentures.

Equity Shares offer returns as high as 18%; however, they entail higher risk compared to other investment options. Mutual Funds are comparatively a safer option ensuring substantial returns and moderately high-risk factor.

Mutual funds are used to purchase different securities such as equity shares, debentures, bonds, etc. Depending on the type of mutual fund – equity funds, debt funds, fund of funds – the return factor and risk factor varies.

If you want to accumulate a larger corpus of funds, you can opt for equity funds which offer a significant avenue for wealth creation.

Balanced funds, which are used to purchase composition of equity shares and fixed income instruments, balance the return and risk factor offer considerable income as well.

Salient features of HDFC Bank Recurring Deposit

The features of recurring deposit offered by HDFC are as follows –

  1. Monthly investment amount: An individual who wishes to open an RD account with HDFC needs to maintain a minimum of Rs. 1000 as a monthly investment. Such amount can be extended up to Rs. 14,99,900.
  2. Minimum tenure: Indian citizens of any age needs to open an RD account for a minimum tenure of 6 months. The minimum tenure for NRIs is 12 months or 1 year.
  3. Fixed Instalment: Once the monthly instalment amount has been decided upon, it cannot be changed during the course of maturity.
  4. Overdue payments: If an individual consecutively delays on 6 payments, HDFC reserves the prerogative to cancel that particular account.
  5. Partial Investments: HDFC Recurring Deposit does not entertain any partial payment of monthly instalments.
  6. Conversion: An individual can also decide to convert his HDFC Recurring Deposit into a Fixed Deposit before maturity.

Eligibility Criteria for RD in HDFC Bank

The following individuals can apply for an RD account with HDFC Bank –

  1. An individual or a Hindu Undivided Family (HUF).
  2. NRI with NRO and NRE accounts.
  3. Minor under the supervision of a legal guardian.

Tax Implications

Income from Recurring Deposits does not have any tax benefits or exemptions on them. Therefore, an individual needs to include the investment amount and also the interest earned in a year during Income Tax filing under “Income from Other Sources.”

Interest on Recurring Deposits is also subject to a 10% TDS. In case of HDFC Recurring Deposits, the minimum amount for which TDS is deducted is Rs. 40,000 for general citizens and Rs. 50,000 for senior citizens in a financial year.

This interest income should be derived from all deposit schemes an individual is holding and not just a single RD scheme.

In case, an individual has an aggregate interest income lower than Rs. 40,000, he/she should file the Form 15G or 15H. After filing the form, the bank would not deduct TDS any longer.

However, if an individual’s total interest in a financial year is higher than Rs. 40,000, he/she can still file Form 15G to prohibit the bank from deducting TDS.

In that case, he/she would need to pay the deductible TDS from his end.

RD in HDFC Bank is a profitable option for individuals who do not prefer to employ their capital into risky investment options while also willing to increase their wealth. However, due to their low earning potential, wealth creation will be moderately low.