What if one doesn’t want to save the same amount each month in a bank deposit? Here's an option.
Most of us save money in one way or the other. Amongst fixed income investments, bank fixed deposit remains a popular option for those who have a fixed sum to invest as a lump sum. Similarly, conservative investors who wish to save a fixed sum for a long term on a regular basis may opt for recurring deposits.
But, what if one doesn’t want to save the same amount each month or quarter. Also, one may have some extra liquidity more than once a month and may want to save more. In such cases, flexible fixed deposits come handy.
In a regular fixed deposit, the amount of investment is fixed as well as the tenure is fixed. One may choose to invest for as low as 7 days to as long as 10 years. The investment is one-time and the maturity of the FD happens as per the tenure decided on the date of deposit. The interest rate applicable is as prevailing on the date of deposit.
Under Recurring deposits (RD), the amount and the tenure are fixed but instead of a one-time lump sum investment, the deposit holder has to compulsory invest on a regular frequency. The RD can be monthly or quarterly and every investment will carry the interest rate as it was on the date of opening the RD account.
Flexible deposits called by different names by different banks is similar to a recurring deposit but instead of a single fixed installment every month, you can decide to vary your installment amount and even the number of monthly deposits.
Many banks offer such flexible fixed deposits that are known by different names. Here we look at what SBI, HDFC and ICICI have to offer.
SBI Flexi deposit scheme
Instead of a single fixed installment every month, you can decide to vary your installment amount and even the number of monthly, within the annual sum defined. It can be opened by accessing Online SBI i.e. SBI net banking or by visiting one’s branch. The online version is called e-SBI Flexi Deposit and is available for 5,6 and 7 years.
The minimum installment amount is Rs. 500, while the minimum and maximum deposit amount in a financial year are Rs 5,000 and Rs 50,000 respectively. While one may deposit any number of installments in a month and any time, the maximum is capped at10.
In a month, one cannot deposit more than 10 times the amount with which the account was opened. For example, if you have opened an account with an initial deposit of Rs 500, the maximum amount that you can deposit in a month will be Rs 5000. To continue the account, a minimum installment of Rs 500 in a year is required. The penalty for default in payment of minimum deposit will be Rs.50 per Financial Year.
The rate of interest is the same as applicable to term deposits and is compounded quarterly. The senior citizen gets an additional rate of interest on SBI Flexi Deposit as applicable to term deposits. Premature withdrawal is allowed but then the rate of interest will be 0.50 per cent below the rate applicable for the period the deposit has remained with the bank.
ICICI iWish deposit
Under ICICI iWish, you can set flexible goal amounts, as well as decide how much you want to deposit every month. The minimum amount of deposit to start with is Rs 500. One needs to login banks internet banking to create this FD. The website carries a iWish calculator to help you accumulate the desired sum over the desired tenure. Unlike an RD, there are no restrictions on the number of investments you make in a month, and the amount you invest is also flexible. There are no penalties for missing payments, and there’s no limit on the number of payments you can make in a month. Iwish account can be opened for a minimum tenure of 6 months and further in multiples of 1 month subject to a maximum of 10 years.
One may close the iWish flexible RD account and the funds accumulated till then are credited directly to the savings account immediately. For premature closing, the interest will be calculated based on the time the funds remained in the iWish flexible RD Account. The penalty for premature closing is 0.5 per cent to 1 per cent of the interest rate.
HDFC Dream Deposits
In case of HDFC, the flexible deposits work slightly different. In HDFC Dream Deposits although the installment amount once fixed is not allowed to be altered at a later date, any addition to installments may be made which will be considered as ‘Top Ups’ and can be done every month to a maximum cumulative amount of twice the installment amount. The minimum tenure is 6 months and the maximum can be 120 Months.
The maximum number of Top Ups one can do in a month is only three, even if the maximum amount has not been reached using three top-ups. The Top Up payment will knock off only one overdue installment and will be appropriated towards the first or the earliest installment overdue. Top up will not be used to offset current month installment scheduled for the future.