A Recurring Deposit (RD) refers to a commonly used term deposit offered by various banks. RD is an investment option that enables a person to make regular deposits and earn good returns from a bank. As it includes regular deposits and an interest income, a Recurring Deposits provides an easier, flexible and risk free option for individuals. Pankaj Mathpal, MD, Optima Money Manager told Zee Business Online, ''Recurring Deposits can be an ideal investment for individuals who cannot afford a risk and looking for a safe and smart investment. It allows you a risk free, tension free earning and offers great liquidity in case of an emergency. It provides you an interest ranging from 6 to 7.5 per cent, as per bank criteria.''

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Given the fact that FDs are more rigid and are not ideal for short terms, a Recurring Deposit allows you to invest small amounts of money. All major banks in India provide a facility of Recurring Deposit Account, with a tenure between 6 months and 10 years, depending upon bank to bank. It provides individuals the benefit of making small investments as per their ease and comfort and on maturity, they are paid a lump-sum amount including the regular, periodic investments and the interest earned on them.

Benefits of Investing in Recurring Deposit

1. Simple to invest: The concept of investing money is pretty simple. For any person who is new to the world of financial investment, experts always advise the person to invest their money in a recurring deposit account. Initial investments in recurring deposit also develops good investing habits for the individual.

2. Fixed guaranteed income: Unlike equity and mutual funds, recurring deposits offer guaranteed returns on the principal amount invested in the short term. 

3. Flexible with time and amount: The tenure of a recurring deposit account usually ranges from 6 months to 10 years. The depositor can select the short-term, medium-term or long-term period for investment in a recurring deposit account. Also the minimum amount to be deposited to open an RD account is Rs 100 to Rs 500 depending on bank to bank. PSBs like SBI, PNB, offer lesser minimum deposit amount than private banks like HDFC, ICICI, Axis Bank. 

''RDs are best if you are not willing to afford any kind of risk with mutual funds, stock market, real estate or probably do not hold too much funds to invest. It ensures secured income, allowing you to invest as per your ease on time and amount,'' added Mathpal.

4. Withdrawal facility: Recurring deposit accounts also offer the facility of withdrawal of the account anytime. The bank might charge a small fee for it but it is still a good option for the depositor to have in case he or she needs the deposited money along with the return on it urgently.

''The withdrawal ease and flexibility makes it highly liquid in nature, you can withdraw your accumulated money, whenever you need without worrying about any buyer or market,'' explained Mathpal.

5. Loan facility: Banks also provide the facility of loan against recurring deposits equivalent to 90-95% of the total money deposited. You can avail for a loan against your RD, which makes it even more valid option to invest. As you don't need to keep any collateral or any other belonging to generate funds for emergency.