Published On: Mon, Jul 17th, 2017

Difference Between Long Term And Short Term Recurring Deposit

Definition of Recurring Deposits

Recurring deposit is a unique nature of deposit in which investors in India invest a fixed amount of money in a fixed time interval and earn a regular income in the future. For recurring deposits, minimum period is six months, and a maximum is ten years. The interest rate on the recurring deposits is given as equal as given in the saving bank accounts, but the interest rate is granted for the money deposited till the time and remained after withdrawal of any money from the account.

Types of recurring deposits

The recurring deposits can be divided into the subpart based on two factors as given below

Based on Flexibility

Recurring deposits can be classified into the category of flexible recurring deposits and fixed recurring deposit. In fixed recurring deposits an investor is required to deposit a fixed amount of money at every due instalment after a fixed time interval from the very first instalment till the time the plan is alive, whereas inflexible recurring deposits an investor can deposit the instalment amount with flexibility of depositing different amount as per their convenience and availability of money.

Based on period

Recurring deposits regarding period can also be divided into two categories one is the long term plan and second is short-term recurring deposit plan. The short term recurring deposit is made for the period of minimum six months to a maximum four to five years, whereas long-term recurring deposit is made for minimum Five years that goes maximum up to 10 years.

Difference between short-term recurring deposits

Tenure

The entire tenure for the short term recurring deposits ranges from minimum six months to a maximum four years depending on the goal of the investor. Tenure for the long term recurring deposits usually set from minimum five years to maximum ten years.

Minimum Amount to deposit

The minimum amount to deposit in both short term and long term recurring deposits is same but varies from bank to bank. Some of the banks set this to be minimum Rs. 10, and other may be 100 or 500. The individual banks partly decide the minimum amount to be deposited in the recurring deposit account as per their rules for their business efficiency.

Interest rate

The interest rate on short term and long term recurring deposits are different, and banks pay similar but not the same interest rate for both type of recurring deposits. A difference of about .25% can be addressed in the long term, and short term was recurring deposits.

Eligibility for recurring deposits

Every individual or institutional investor should meet the minimum eligibility criteria set by the particular banking or banking rules. A short term recurring account holder is required to submit some KYC documents to know the customer. For long term recurring deposit account along with the documents and eligibility criteria as it is for short term recurring, banks approached to the client to open a saving account with them so that transferring the interest amount can be easily done with any problem.

Document to be submitted for KYC

Proof of Identity

Proof of Address

Passport Size Photograph

Now that you have understood the difference between long term and short term recurring deposit, you may click here to easily calculate your recurring deposit in just a click your fingertip.

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