3 mins
01 April 2024
Systematic Deposit Plans (SDP) and Recurring Deposits (RD) are two of the most common FD investment options available to investors. While they share similarities as forms of investments, they have distinct features that cater to different financial needs and goals.
Difference in SDP and RD
- Nature of investment
- SDP is a type of investment that some banks and financial institutions offer as a savings and investment plan. It entails making set-amount deposits at regular periods to create distinct fixed deposits with distinct maturity dates.
- RDs are a type of term deposit made available by banks in which customers can make regular, monthly investments of a fixed sum. The interest rate for RDs is predetermined at the time of investment and is typically less than the interest rate for fixed deposits.
- Flexibility
- SDP offers greater flexibility regarding the size, frequency and length of deposits. Based on their financial needs and goals, investors can select the deposit amount and frequency that work best for them.
- When starting an RD account, the deposit amount, frequency and tenure are all predetermined. Compared to SDP, it provides less flexibility.
- Interest rates
- SDP invests primarily in fixed deposits because they have greater interest rates than RDs do. Each fixed deposit in an SDP has an interest rate that is predetermined at the time of deposit.
- Compared to fixed deposits, RDs offer lower interest rates depending on the bank/ NBFC. The interest rate is established at the start of the RD term and stays the same the entire investment duration.
- Interest payout
- SDP offers a cumulative interest payment option, whereas RD offers both cumulative and non-cumulative options.
- In the cumulative option, interest earned is re-invested in the deposit and paid at the time of maturity.
In conclusion, Systematic Deposit Plans offer more flexibility and potentially higher interest rates to investors compared to Recurring Deposits. Bajaj Finance Systematic Deposit Plan gives you an option to start investing with Rs. 5,000 every month and has one of the highest safety ratings in the market, making it a smart and safe investment option.
