1.0 INTRODUCTION

Recurring Deposit (RD) is one of the easiest ways to start your savings. Unlike a Fixed Deposit (FD), where you need to invest a bulk amount, an RD lets you save small sums of money at fixed intervals.

This way, your initial burden reduces, and you can set aside a small amount towards your savings goals every month.

An RD may not work for you if your income or expenditures vary every month.

An RD may not work at all times.

This is because our expenditures vary every month, like in the case of those who freelance or are into business, as their incomes vary every month.

So, what happens if you cannot afford to put aside a particular sum every month?

In such cases, a flexible RD scheme may suit you better.

A head-on comparison between the features of a regular RD and a flexible RD is given below:

2.0 THE FLEXI RECURRING DEPOSIT

Flexi Recurring Deposit scheme is a unique Recurring Deposit scheme which offers flexibility to the customer to choose core installment and to also choose monthly flexi installments in multiples of the core installment.

It offers convenience and complete flexibility to depositors, where lump sums can be invested as and when available.

A Flexi RD comes with two sections, inclusive of the core amount, which are deposits made by the account holder when the RD is opened and the flexible amount, which can change with every monthly installment, depending on the funds available.

Every Flexi Recurring Deposit has to be opened with a core amount for a particular tenure. This amount changes depending on the bank where the RD is being held.

The variable component of the recurring deposit can be incremented in specific multiples with a cap on the amount to be invested.

Interest rates and tenure on Flexi Recurring deposit will vary with the bank and the rates will be same as applicable for recurring deposits.

The interest rate for the core amount is as per applicable rates for the recurring deposit tenure, while the flexible portion carries an interest rate from the deposit date.

The core amount has to be deposited on the pre-determined date or a penalty will be imposed by the bank.

The flexible amount can be invested at any time of the month and no penalty will be levied.

Flexi Recurring Deposit schemes can be pre-closed at any time and do not carry any premature closure charges.

3.0 FEATURES OF FLEXIBLE RECURRING DEPOSIT

As compared to the recurring deposits, flexible recurring deposits have various features that make it attractive amongst the account holders. Given below are a few:

3.1 Pros of Flexible Recurring Deposit

• The flexi RD can be opened with a small initial amount fixed by the bank.

• Account holders can open the flexible recurring deposit with a core amount and further can add the variable amount as per their convenience and availability.

• No need to set aside a fixed sum every month. Invest in the flexible recurring deposits, you get to save money as and when it is available. And also have the option to cut short the deposit amount if there is money shortage. The amount you contribute towards the account can vary based on your monthly income and expenditures.

• Since there is no fixed amount, you can contribute more when your income levels are high and reduce the amount when you are running low on cash.

• No compulsion to fund the RD Account every month. There are no penalties levied for delayed payments of variable amount. You can skip payments without paying any penalties.

• You may avail a loan or overdraft facility against the flexi RD of up to 90-95% of the outstanding balance in your account at interest rates as per Bank guidelines.

• You can prematurely close your flexible RD Account if you are in need of cash for emergencies.

3.2 Cons of Flexible Recurring Deposit

• There is a certain amount limit that is fixed by the bank and one cannot exceed the limit for depositing the amount.

• You must deposit the core amount on the particular date to escape from penalty.

• The rate of interest is applicable as per the RD rates tenure on the core amount that is deposited. While the rate of interest is applicable to the variable amount from the date of deposit.

• In case of pre closure, the interest is generated based on the time for which the funds were in your account, and not based on the original tenure.

• You cannot partially withdraw money from your flexible RD

• You are tempted to pre-close your flexible RD. You can easily transfer the deposit amount directly from your Savings Account using Internet Banking. And the funds will be transferred directly to your Savings Account at the end of the maturity period or pre closure.

4.0 CONCLUSION

As name suggests, it is a flexible recurring deposit, where instead of a fixed sum invested monthly, you can invest any amount at any time, during the term period.

It offers added convenience to a regular RD account. It allows an individual to invest a flexible amount as per his/her convenience.

While the core investment amount is pre-decided in this type of deposit, the account holder has an option to deposit amounts in multiples of the core amount.

While the investment flexibility is available, interest on the amount is calculated at a stable rate.

Interest calculation on the core multiples are done based on investment duration. Several banks offer flexible RD schemes with the varying tenure as well as conditions.