Recurring Deposit (RD) is a type of term deposit offered by banks and non-banking financial services. RD schemes allow customers to build up their savings through regular monthly deposits of fixed sum over a fixed period of time. An RD account allows you to deposit a pre-specified amount at pre-decided intervals. The installment amount once fixed, cannot be altered. For instance, if you sign up with a bank to invest 1,000 every month for 12 months in a regular RD, you will have to invest the specified amount at a fixed date every month.

The rate of interest offered on an RD is similar to that of fixed deposits. However, you should know that since RDs come under the definition of time deposits, the interest earned will attract tax deducted at source (TDS).

An RD account can be opened with a bank or a post office. Both State Bank of India (SBI) and post office offer RD options to their customers.

Here is a comparison of RD accounts offered by SBI and post office:

-SBI RD interest rates vary between 6.4% and 6.85 % for regular customers whereas post office RDs offer a quite high interest rate of 7.3% per annum, compounding quarterly.

-For an SBI RD account, the term of deposit may vary between 12 months and 120 months, but post office offer RDs for a tenure of 5 years only.

-An SBI RD account can be opened by cheque/cash, but an RD account in a post office can be opened by cash only.

-Other than visiting the branch to open an RD, nowadays you can open an SBI RD account online through net banking facility as well, but for opening a post office RD account you have to visit the post office branch.

-In SBI RD account, customers are required to make monthly deposits of minimum of 100 and in multiples of 10. There is no maximum limit on the deposits. But the minimum amount required for opening a post office RD is 10 per month, or any amount in multiples of 5. However, there is no maximum limit on investment.

-SBI imposes penalty charges for non-deposit of monthly installments in case of an RD account. For account of period five years and less, the bank charges 1.50 per 100 per month and for above five years, SBI charges 2 per 100 per month. In case of a Post Office RD account, if the subsequent deposit is not made up to the prescribed day, a default fee of 0.05 for every 5 is charged. After four regular defaults, the account is discontinued and can be revived in two months but if the same is not revived within this period, no further deposits can be made.

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