Have you ever wondered what can you do if you want to open a fixed deposit account but do not have access to a large sum. Is this possible to accumulate the deposit money in tranches?
Well, Bank of Baroda offers systematic deposit plan (SDP) to those depositors who want to start an FD (fixed deposit) but do not want to invest in lumpsum.
It works on the lines of recurring deposit (RD) account wherein you make a monthly deposit and earn a higher rate of interest on it. Upon the maturity of your deposit, you stand to receive your principal along with interest earned.
This is a plain vanilla monthly savings plan which helps depositors to regulate their savings for earning higher returns, explains Bank of Baroda on its official portal.
A. Instalments: Unlike a typical term deposit plan, you do not need to make one-time deposit. The deposit can be made in instalments.
B. Flexible tenures: You can make a deposit for any tenure that could range between six to 120 months i.e., half a year to 10 years. The term could be 6, 9, 12, 15, 18, 21, 24…120 months.
C. Higher rate of interest: The interest rates keep fluctuating and vary on the basis of tenure. The interest is compounded quarterly and paid on maturity along with principal amount.
D. Overdraft facility: Depositors can avail overdraft (or loan) facility up to 95 percent of the deposit amount.
Anyone, individually or jointly, can open a systematic deposit plan. The individual could include minors, farmers, salaried people, businesspersons, self-employed professionals, traders, housewives.
Even clubs, associations, educational institutions, societies and joint stock companies are also allowed to open an SDP.
The minimum amount required to open an account is ₹50 in rural and semi-urban, or ₹100 in urban and metro cities.
The instalment amount fixed by the depositor at the time of opening the account will have to be deposited as monthly instalment. However, the instalment amount should meet the criteria of minimum deposit amount mentioned above.
The payment of interest is subject to tax deducted at source (TDS) as per the prevailing Income Tax (I-T) Act. However, the tax is deducted when annual interest income is more than ₹40,000.
The instalment for any month has to be paid during the month. In case of delay in payment of any instalment, the bank is authorised to impose a penalty at the rate of Re 1 for every ₹100 per month across the tenures.
In case of premature closure of deposit, the bank will deduct 1 per cent penalty before disbursing the sum.
