What is a recurring deposit?

What is a recurring deposit?

• A. A loan that requires regular payments
• B. A savings scheme for consistent contributions of a fixed amount
• C. An investment strategy for long-term growth
• D. A short-term saving option with variable deposits

Answer: (B)

A recurring deposit is defined as a savings scheme where individuals make regular contributions of a fixed amount on a periodic basis, typically monthly. This type of account allows savers to deposit a predetermined sum of money consistently, which accumulates interest over time, leading to a significant maturity amount. This method of saving is particularly appealing to individuals who want to instill a habit of saving while ensuring that they build a corpus gradually. The fixed contributions help in budgeting, allowing individuals to plan their finances effectively. Additionally, the interest earned on these deposits is generally higher than what is offered on regular savings accounts, making recurring deposits a worthwhile option for systematic saving. In contrast, the other options describe either different financial instruments or strategies. Loans typically involve borrowing funds, while investment strategies may focus on capital growth over the long term rather than consistent deposits. Short-term savings options with variable deposits do not meet the structure or purpose of recurring deposits, which emphasize regular, fixed contributions.

A recurring deposit is defined as a savings scheme where individuals make regular contributions of a fixed amount on a periodic basis, typically monthly. This type of account allows savers to deposit a predetermined sum of money consistently, which accumulates interest over time, leading to a significant maturity amount.

This method of saving is particularly appealing to individuals who want to instill a habit of saving while ensuring that they build a corpus gradually. The fixed contributions help in budgeting, allowing individuals to plan their finances effectively. Additionally, the interest earned on these deposits is generally higher than what is offered on regular savings accounts, making recurring deposits a worthwhile option for systematic saving.

In contrast, the other options describe either different financial instruments or strategies. Loans typically involve borrowing funds, while investment strategies may focus on capital growth over the long term rather than consistent deposits. Short-term savings options with variable deposits do not meet the structure or purpose of recurring deposits, which emphasize regular, fixed contributions.