A Recurring Deposit (RD) account is a type of term deposit offered by banks and post offices in which a depositor puts a certain amount of money each month for a set length of time, commonly spanning from one year to five years. The structure is for people who want to put down a set amount each month with the goal of receiving a payout after a few years. RD accounts have a six-month minimum deposit period and a ten-year maximum deposit period. They pay a higher rate of interest than savings accounts and usually compound interest once each quarter. RD accounts have a lock-in period of 30 days to 3 months, depending on the bank.

To open an RD account, one can go to any bank or post office and fill out the form. After which, additional formal documents like a PAN card and proof of residence are required, and the first months amount needs to be paid to the bank or post office. Some institutions such as IDFC FIRST Bank give the option of opening an RD account online. To open an RD account online, one can enter basic information such as name, email address, and mobile number.

RDs are different from Fixed Deposits/FDs in that they are flexible in most aspects. An RD account holder can choose to invest a fixed amount each month while earning decent interest on the amount. RDs are an ideal saving-cum-investment instrument. Premature withdrawals are allowed depending on the bank, but they may allow closing the account before the maturity period on certain conditions.

Opening an RD account is fairly simple for anyone who meets the requirements. Most banks allow opening an RD account online via an easy online application as part of their regular online portal. To close an RD account, one can go into the bank and submit a request in person, or it can be done online via the bank’s website or mobile app.