Systematic Deposit plan is a monthly savings plan aimed at helping investors who are looking to invest in Fixed Deposits through monthly savings.
For those looking to save on a regular monthly basis and earn a fixed rate of return on investments, recurring deposits fit the bill. Recurring deposits are available in all banks and in the post office. Recently, Bajaj Finance Limited, the lending and investing arm of Bajaj Finserv, has launched Systematic Deposit plan (SDP), a monthly savings plan, for those looking to invest in Fixed Deposits through monthly savings.
The Systematic Deposit plan is somewhat similar to recurring deposits but with a big difference. Unlike recurring deposits where the final maturity amount is paid to the investor at the end of the chosen term, in SDP, there is a difference. “Systematic Deposit Plan is an industry-first monthly savings plan wherein you can gain monthly returns, as you save on a monthly basis. When you invest in RDs, you get an accumulated amount at the end of your tenor. However, with SDP, you get monthly returns at the end of your maturity period,” says Sachin Sikka, Chief Business Officer, Retail & Corporate Liabilities, Bajaj Finance. This means, in SDP, each deposit is treated as separate FDs.
Starting at Rs. 5000 per month, investors will get the interest rate prevailing on the date of every monthly deposit, which is applicable to that particular deposit. While the first payment is to be made via cheque, subsequent deposits are debited directly from an investor’s bank account through a NACH mandate.
The deposits can be made for anywhere between 12 and 60 months. To provide flexibility, one may make monthly deposits ranging from 6 to 48 within the tenure chosen. For example, if one opts for a 24-month tenure, the investor can make just 6 deposits during that period or make 24 months or even make 48 monthly deposits.
So, if one opts for a 48-months deposit and starts depositing Rs 7,000 each month, “The interest rate prevailing on the date of each deposit will be applicable to that particular deposit. If there is a change in FD interest rates, the same will change for subsequent deposits,” informs Sikka.
But, what if the investors miss the due date for making the deposit? There is no charge or penalty to the investor on missing an instalment. The plan has the option to withdraw their savings pre-maturely anytime or even take a loan against the deposits.
For goals which are not long term, one looks for investment options to keep saving a fixed amount every month. For regular savers, who don’t want to wait to accumulate a corpus to invest in a fixed deposit, saving each month in a systematic manner can be met through this Systematic Deposit Plan.