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systematic way to invest in recurring deposits for nris

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recurring deposit for NRIThe stock markets have behaved wobbly for the last 5 years and becoming a deterrent for new investors to enter the market. The

Recurring Deposit Account, maintained in Rupees, is an excellent option for NRIs to make big savings by investing small sums every month.

Recurring Deposits offer a systematic goal based approach to investing at attractive interest rates. So, whether you want to create a fund for your children’s education or marriage or to buy a house or for a dream holiday? Whatever may be your financial goals, through the Recurring Deposit Scheme, you can save a little every month, so that at the time of need, you have sufficient funds to achieve your financial goals.

Another important factor is that the interest rates have peaked and on their way down, it is the right time to lock your funds in good debt instruments. But what if you don’t have a lump sum to invest? This is where recurring deposits come in handy. A

s an NRI Customer, you can invest in an NRE Recurring Deposit or in an NRO Recurring Deposit.

In case of an NRE Recurring deposit (RD), the investments towards the deposit installments should come from the

NRE accounts

only. Investments towards the deposit installments for NRO Recurring deposits can come from the NRE accounts or from NRO accounts.

The interest earned on NRE RDs is exempt from Income Tax in India and freely repatriable. The interest earned on NRO RDs is taxed at a rate of 30% + Cess and is repatriable subject to certain documentary requirements.

Choice of opting for an NRE RD or an NRO RD will depend on where the investment funds are coming from. For e.g. if the funds are coming from your overseas funds then you should opt for NRE RDs. On the other hand, if you are getting regular investments from rental income or any other sources in India, then you will be able to place them only in NRO RDs.

The beauty of an RD is that the investment per month is not big and you get the benefit of the interest rates offered on Fixed Deposits without any mandatory requirement to commit the entire amount upfront.

The funding for your RD installments can be taken as a standing instruction for debit from your NRE account or your NRO account.

The interest on Recurring Deposits will be calculated by the Bank in accordance with the directions advised by the Indian Banks’ Association. The interest rates will be the same as the rate applicable for NRE Fixed Deposit in case of an NRE RD and as applicable for NRO Fixed Deposit in case of an NRO RD. The interest on deposits is compounded quarterly at the applicable rates.

The important point to note is that the installment amount once fixed cannot be altered at any later date. Hence be sure on the amount that you are committing to. Also, partial payment of installments is not permitted.

In case of an NRE RD, the minimum lock in period is 1 year and the RD can be placed for a maximum period of 10 years. What you need to note is in case the RD is closed prematurely within a year, no interest will be paid and only the principal amount will be given back to you.

The interest is paid only on maturity. The other benefit of a RD is that owing to certain constraints you may miss one or two installments, however on maturity the deposit will be due for repayment and shall mature on completion of the contracted tenure, even if there are installments still to be paid. Of course the actual maturity amount will differ from the one mentioned in your Deposit Advice, since all installments were not paid.

Some banks do charge some penalty in case of delayed instalments; you may need to read your conditions clearly as laid down by the bank and make a note of this. However, most banks don’t charge a penalty for missed or late payments.

What more you need to know?

  • Partial payments are not allowed.

  • Nomination facility is available on the RD

  • Some banks do offer an overdraft facility on RDs

  • RDs can be opened jointly

  • Once the tenure is fixed it cannot be altered

  • The date of your monthly RD installment will depend on the date you opened your RD account.

About the Author:

The author, Daisy Fernandes has a Masters in Management from SP Jain, a Banker by profession and currently pursuing CFP certification. She can be reached at




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