SBI Recurring Deposit

SBI Recurring Deposit (RD) – Types, Interest Rates & Benefits

The State Bank of India offers a diverse range of deposit schemes to facilitate both long and short term investments for individuals. Being the largest bank in India, SBI’s schemes are backed by decades of superior returns and appreciable performance, making them some of the most trusted investment options among consumers.

SBI RD or Recurring Deposit is one such scheme that enables individuals with regular income to deposit a fixed portion of the same into it and earn interest on the deposited amount at the applicable rate.

Like fixed deposits, recurring deposits also allow investors to build a savings corpus to through monthly deposits, over a pre-decided period. Since the interest rate on recurring deposits is similar to that of fixed deposits, they provide higher returns than other savings schemes.

Additionally, with recurring deposits, individuals can avail the same interest rate on their last deposit that they make a year later, even if the interest rates have decreased at that time.

RD interest rates offered by the SBI –

The SBI offers interest rates on its recurring deposits at par with its fixed deposit schemes. Following are a few important details regarding the interest rates –

  • It can provide an interest rate of up to 6.95%.
  • The interest rate offered by SBI on RD is compounded at each quarter.
  • The minimum amount for investing in SBI RD is Rs. 100.
  • The interest rate offered by SBI for individuals over 60 years can go up to 7.45%.

Following is a table illustrating the interest rates applicable on SBI Recurring Deposit for varying investment tenures –

Period of investment Recurring deposit rates for individuals below 60 years of age  Recurring deposits applicable for senior citizens
Less than 1 year (211 days) 6.40 6.90
1 year to < 2 years 6.80 7.30
2 years to < 3 years 6.80 7.30
3 years to < 5 years 6.80 7.30
5 years to up to 10 years 6.85 7.35

Features of the SBI RD Scheme – 

The SBI Recurring Deposit scheme imparts an individual with several benefits. Some of them are as follows –

  1. Individuals can avail a loan against the amount deposited in their RD. This loan facility is available for up to 90% of the amount available in a person’s account. SBI also allows people the facility of an overdraft on the available RD amount.
  2. The tenure for the deposit ranges between 12 months and 120 months. Thus, unlike other RDs, the recurring deposit offered by SBI can also be used as a long-term savings option at the discretion of the account holder.
  3. One can choose to utilise a nomination facility for the RD, through which they can nominate their spouse or other family members to be the receiver of the final amount accumulated in the RD.
  4. SBI allows minimum deposits in multiples of Rs. 100 on their RD account.
  5. Individuals can avail the services of the SBI RD scheme from any SBI bank branch.

Associated Charges for SBI Recurring Deposit Account –

There are penalties and charges that are levied on individuals under certain circumstances. For instance,

  1. Individuals who hold an account with a period of five years or less will be charged with a penalty of Rs. 1 on every Rs. 100 if they fail to pay the due monthly instalment.
  2. For those with an account of more than 5 years, the penalty levied will be Rs. 2 on every Rs. 100.
  3. Individuals who have three or more consecutive defaults in the payment of monthly instalments will be levied a service charge of Rs. 10 when the RD account reaches maturity.
  4. If an individual fails to make six consecutive payments in the RD, the account will be closed pre-maturely with the balance paid out to him/her.

Eligibility Criteria to Start an RD Account with SBI?

To open an RD in SBI Bank, individuals have to comply with the following eligibility criteria –

  • Only Indian residents or members of a Hindu Undivided Family can open a recurring deposit account.
  • Non Residential Indians can also have a recurring deposit account with SBI provided they apply for Non-Resident External (NRE) or Non-Resident Ordinary (NRO) account.
  • In the case of minors, individuals can open an RD account provided that their finances are monitored by their legal guardians.

Types of RD Accounts Offered by SBI

There are 3 types of RD schemes offered by SBI to suit the needs of consumers –

Regular Recurring Deposit account – 

This particular type of SBI RD account is for those who want to build up a savings corpus by depositing a percentage of their monthly income into the account. This account offers long-term savings options, and their tenure can extend for up to 10 years.

Also, the interest rates offered on this account remains fixed throughout the tenure. That is why it is best to start depositing in the account when SBI offers high interest rates.

SBI Holiday Savings Account – 

This exclusive deposit account facilitated by SBI was created in partnership with Thomas Cook for individuals looking to start holiday savings account for their travels. When individuals choose a holiday package from Thomas Cook, the cost of the package is divided into 12 equal instalments.

Individuals can also earn interest on their deposits.

Flexi Deposit Scheme by SBI – 

In this unique RD scheme offered by SBI, individuals can change their monthly deposit amount according to their convenience. As its name suggests, it provides individuals with the flexibility of depositing different amounts for each month.

For this account, individuals can choose to deposit a minimum amount of Rs. 5000 each year and it can go up to Rs. 50,000 per year.

Tax Benefits for SBI on Recurring Deposits

RD is taxable under the Income Tax Act, 1961. The corpus deposited in an RD is accounted for in an individual’s yearly income, and the interest earned on it attracts 10% TDS or Tax Deduction at Source. However, TDS on RD is applicable only if the total interest earned is above Rs. 10,000 in a financial year.

Individuals can also save the TDS applicable on their interest by submitting Form 15H or Form 15G.

Individuals can submit Form 15G if they comply with the following conditions –

  • If one is an individual or belong to a Hindu Undivided Family.
  • They must be a resident of India.
  • The tax implication on their total income is zero.
  • If they are above the age of 60 years.
  • The total interest income of individuals is less than the minimum exemption limit for the particular year.

Individuals can submit Form 15H if they comply with the following conditions –

  • They have to be an Indian resident.
  • If they are above 60 years of age or will be 60 at the time of submitting the form.
  • If the tax on total income is zero.

However, individuals should ensure that they submit the forms before filing their income tax returns to avail the tax exemptions.

Recurring deposits are stable savings schemes that offer limited returns. That is why an RD account in SBI is not lucrative enough for individuals looking to earn high returns from their investments.

They can alternatively invest in other money market-related schemes like Mutual Funds that can help them to earn high returns while limiting the risks associated with investing in pure equity shares.

Thus, they can help individuals to maximise their returns on investment while reducing the risks of loss by quite an extent.