Variable Recurring Deposit – Best Saving Product for Salaried People

Planning to save some amount of money every month? Confused whether to go for chit funds, savings bank account or recurring deposit?

Here is an option you ‘must’ consider. It gives flexibility to save whatever you have, pays good interest, most importantly, it is safe.

It’s ‘variable recurring deposit’. It’s almost like a recurring deposit, but gives you flexibility to pay as your wish. In this savings scheme, you need to choose ‘core installment’ while opening account. Core installment is the minimum amount, that you need to deposit every month. It is a fixed amount.

Features of variable recurring deposit:

  • The best feature of variable recurring deposit is, you can deposit any number of times in a month. However, the amount deposited should not exceed more than 10 times the core installment amount. For example, if your core installment amount is Rs 500, you can deposit till Rs 5,000 in a month.

  • The amount that is deposited every month should not be less than the core installment. For example, if your core installment is Rs 500, then you have to deposit Rs 500 every month. You have the option of increasing your installment amount, not the core installment.

  • There are some banks that offer flexibility in missing monthly installments under certain conditions. For example: If your core installment is Rs 500 per month and if you have deposited Rs 1,000 in this month, you have the flexibility of not paying the installment next month.

How to use variable recurring deposit?

Carefully plan your first or the core installment:

  • Suppose you are having a typical savings of Rs 2,000 per month. Don’t put Rs 2,000 in first installment (core installment) or else you will have no flexibility if any cash requirement arises in the future.
  • Better put say Rs 500 in first month and carefully keep aside the amount of Rs 1,500.
  • Next month let’s say you still have savings of Rs 2,000. Then deposit Rs 3,500 (Rs 1,500 from last month and Rs 2,000 from this month) in second month.
  • Now in each month based on your financial situation you can deposit from Rs 500 to Rs 5,000.

In case you have a financial need, you deposit Rs 500 that month. Later, in case when you get a performance incentive of Rs 2,000 you can deposit Rs 4,000 in that month. It is important on how you plan your core installment (first one) properly.

Benefits of variable recurring deposit: Variable recurring deposit offers many benefits such as:

  • Flexible & convenient to use – You have the flexibility in choosing the amount of deposit as well as the payment of installments. That is, installments can be payable in multiples times, however the total amount in a month should not exceed 10 times of your core installment.

  • No forceful savings – Unlike regular recurring deposit, there is no compulsion of depositing the fixed amount every month before the due date. Moreover there is no limit on number of deposits per month. Some banks even allow you to deposit one or more times during a month.

  • Flexibility in period of deposit – In variable RD, you have the flexibility of choosing the period of deposit. The minimum and maximum period of deposits may vary from bank to bank. Most banks offer 6 months to 5 years as minimum and maximum periods respectively.

  • High rate of interest – The interest earned on variable recurring deposit will be similar to the interest applicable on term deposits of the same tenure. In some banks, it is mentioned that, interest will be calculated on monthly basis, for the minimum balance between 10th and last day of the month. And, this amount will be credited every quarterly.

  • Safety – Banks provide more safety to your hard earned saved money, when compared to other saving avenues.

  • Net banking facility – Banks also offer the facility of net banking, where you can transfer your money to other accounts.

List of some of the banks providing variable RD:
Here are some banks that offer variable recurring deposit schemes:

  1. Allahabad Bank offers Allbank monthly plus
  2. Andhra Bank offers AB recurring plus
  3. Bank of Baroda offers Gen-Next Suvidha
  4. Indian Bank offers Variable recurring deposit
  5. Oriental Bank of Commerce offers OBC Aadhar
  6. Punjab National Bank offers flexi recurring deposit
  7. Union Bank offers Union Monthly plus

Thus, variable recurring deposit allows you to save a lot of money while providing flexibility both in increasing or reducing the amount based on developments in your personal life. This is a great financial product that is suitable for salaried employees getting fixed salaries.

Get into a habit of saving small amount of money regularly with the help of variable recurring deposit. After a period of time, you will see big savings. Does this work good? Then, don’t stop here. Go ahead and open a variable recurring deposit at the earliest.

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