ICICI Bank Recurring Deposit

ICICI Bank Recurring Deposit – Interest Rate, Investment Option and Benefits

Recurring Deposits are considered term deposits which offer a safe investment option and steady income opportunity to investors.

In case of a recurring deposit, an individual needs to deposit either a fixed or a flexible amount every month in his/her account. Interest is earned quarterly on a compound basis.

Because of the factor of compounding, this deposit scheme generates substantial returns in comparison to other deposit facilities. ICICI Bank offers two forms of recurring deposit schemes for its customers – Delightful Deposits and iWish.

Both these Recurring Deposit schemes have lucrative benefits and features which make ICICI Recurring Deposit ideal for individuals who prefer to create wealth without bearing any risk or minimal risk on their investments.

All recurring deposits have a fixed lock-in period, depending on which the rate of interest is determined. The minimum lock-in period is 6 months in case of ICICI Bank Recurring Deposits, and after that in a multiple of 3 months.

ICICI Recurring Deposit Rate of Interest

Interest rates vary depending on the tenure as well as the individual’s age. Senior citizens are offered a higher rate of interest on their RD accounts compared to general citizens or NRIs.

The following table demonstrates the interest rates on Delightful Deposits.

Lock-in Period  Interest Rates for General Citizens (per annum) Interest Rates for Senior Citizens (per annum)
6 months 5.75% 6.25%
9 months 6.25% 6.75%
12 months 6.7% 7.2%
15 months 6.8% 7.3%
18 months 7.1% 7.6%
21 months 7.1% 7.6%
24 months 7.1% 7.6%
27 months 7.1% 7.6%
30 months 7.1% 7.6%
33 months 7.1% 7.6%
36 months 7.1% 7.6%
36 – 60 months 7% 7.5%
60 – 120 months 7% 7.5%

Note: Interest rates are subject to revisions to the bank’s discretion.

The following table demonstrates the rate of interest on iWish ICICI Recurring Deposit –

Lock-in period Interest Rate for General Citizens (per annum) Interest Rate for Senior Citizens (per annum)
6 months 5.75% 6.25%
7 – 9 months 6.25% 6.75%
10 – 11 months 6.5% 7%
12 months 6.7% 7.2%
13 – 17 months 6.8% 7.3%
18 – 24 months 7.1% 7.6%
25 – 36 months 7.1% 7.6%
37 – 60 months 7% 7.5%
61 – 120 months 7% 7.5%

Note: Interest rates are subject to change according to the bank’s discretion

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

Here, I is the Total Interest Amount

P is the Principal Amount

R is the Rate of Interest

N is the lock-in period in months

Example – Mr. Angad, aged 65, has decided to open an iWish ICICI Recurring Deposit account for 39 months with a regular monthly instalment of Rs. 600. The applicable rate of interest, in this case, is 7.6%. Therefore, the interest amount he would be earning at the end of maturity period would be Rs. 2,445.

Investment Options Other than ICICI Bank RD

Individuals can also decide to opt for other investment options which reap better profits compared to Recurring Deposits. If your investment objective is exponential wealth creation or substantial capital appreciation, the interest rates on Recurring Deposits are too low for that purpose.

As is apparent from the example mentioned above, ICICI RD, or any other Recurring Deposit for that matter, only allows a small amount of wealth creation, even in long-term tenures.

The investment options mentioned below are instrumental to significant wealth creation in the long run, but they also bear the potential risk for investors.

  • Mutual Funds

These are professionally managed investment pools where several investors invest in a single fund which is used to purchase securities such as equity shares, fixed income instruments, sovereign securities, etc.

These funds are managed by AMCs which appropriate MER as brokerage expenses and disburses profits yielded on funds amongst the investors.

In mutual funds, as in ICICI Bank RD, individuals can decide to invest periodically through SIP. It provides the advantage of Rupee Cost Averaging, which reduces the volatility of the funds against volatile market fluctuations.

These funds can earn substantial returns on them depending on the kind of fund – equity funds, debt funds, balanced funds, and fund of funds. Equity funds have high-income potential compared to other funds, while also bearing the highest risk.

  • Equity Shares

An individual can also decide to invest directly in equity shares which offer returns up to 18%. However, an investor is at risk of bearing equivalent losses as well. If you have a high-risk appetite, you can decide to invest in equity shares directly.

Equity funds, on the other hand, entail lower risk compared to stocks while offering returns close to equity shares.

  • Fixed Income Securities

Securities such as government bonds and treasury bills also offer high returns compared to recurring deposits.

As they are sovereign or government-backed securities, they are much safer than other types of investment instruments. You can also opt for debentures or corporate bonds which offer significant wealth creation in the long-term; however, they bear higher risks than sovereign securities.

Features of ICICI Recurring Deposit

There are two kinds of recurring deposit schemes offered by ICICI Bank – iWish and Delightful Deposits.

Delightful Deposit is unique with its top-up feature. This scheme has collaborations with multiple lifestyle establishments which offer vouchers in the form of top-up. ICICI Recurring Deposit customers can avail these top-ups along with interest.

IWish, on the other hand, is distinct in its flexible deposit options. The following are its features –

  1. Flexible Deposits: An individual has the flexibility to deposit any amount within the range of Rs 50 – 49999 as his/her monthly investment depending on their affordability.
  2. Penalty: ICICI Recurring Deposit does not appropriate any penalty on missed or postponed payments.

Tax Implications on Recurring Deposit

Income from ICICI Bank Recurring Deposits is not exempt from Income Tax. RD account holders are required to include their investment amount and interest income in a financial year under the head “Income from Other Sources.”

Interest on RD attracts TDS in case the total interest amount of an individual from all deposit products in a financial year is more than Rs. 10,000.

However, the bank would not know if your interest income is less than Rs. 10,000 unless you file Form 15G or 15H. The bank would not deduct TDS from your interest once you file the form.

It is applicable even if your interest income is higher than Rs. 10,000. However, in that case, you would require paying the TDS from your end while filing Income Tax.

ICICI Bank Recurring Deposit is a preferable option for individuals who do not prefer to bear any risk on their capital while also employing it for savings and wealth creation purposes.

However, as is already established, their wealth creation potential is relatively low compared to other investment options.