20/01/2020
What are Fixed Deposits and Recurring Deposits ?
All the Banks want to expand and grow. They want their branches on new locations,want to provide loans to big companies etc. Thus they too want some money.This is where they announce a Fixed Deposit scheme or a Recurring Deposit scheme. Big banks such as HDFC,ICICI,SBI tend to give less interest rates than smaller co-operative banks which may give more returns than the big banks.As we have discussed in the previous post.More Risk=More Returns.These co operative banks have more risk to declare themselves as Bankrupt than the big banks.
Fixed deposits are of Fixed returns for fixed tenure. These are generally 7-8% which is greater than inflation rate. When you invest a fixed amount for a fixed tenure,you basically are an investor of that bank for that particular tenure. The banks would now use your money for their expansion etc. This is a one time investment that is you give x amount of money initially and you get an interest rate for that x amount after the completion of that tenure as promised by the bank
Recurring Deposits are not a one time investment but you invest x amount of money every month from your salary for that fixed tenure.These too give a 7-8% rate of interest.
After the Tenure is complete which may be 6months or 1 year or two year, your investment is matured,that is the banks hand you your money
Advantages
1) Low risk
2)Longer the tenure,higher the return
3)rate of interest(Fixed Deposit) >rate of interest(Savings account)
Disadvantages
1)Low returns than other investment options
This is all you wanted to know about Fixed Deposits and Recurring Deposits
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