For short-term goals and low-risk appetite, flexible RD is an option

Customer can invest an amount any time, and withdrawals are flexible as well

If you are among those who cannot stomach the volatility of debt mutual funds, there are banking products you can look at for short-term goals. Top private banks have launched special recurring deposits (RD) for customers to save based on their goals.

What makes these RDs different from other deposit-based products is their flexibility, and a friendly online user interface to allow individuals monitor the progress. After opening the flexible RD account, an investor can put in any amount he wants every month. There’s no commitment for a fixed amount like that in case of a regular RD.

Axis Bank has branded its flexible RD as Axis ASAP, and is available only on its mobile app. HDFC Bank calls it Dream Deposit and ICICI Bank offers it as iWish account. Both of these are available on internet banking. ICICI Bank also offers iWish Chhota Savings. Under this, the customer can round off their day-to-day transactions such as fund transfer or bill payments, and invest the amount in their iWish account. 

 

There are three round-off options available — Rs 50, Rs 100 and Rs 500. Each bank has restrictions on the maximum and minimum that can be deposited; there are limits on the goal amount and the tenure of the RD. Before opening an account, do check these limits. HDFC Bank, for example, allows minimum monthly ‘top-up’ of Rs 1,000, a minimum tenure of six months and a maximum tenure of 10 years. ICICI Bank has a minimum goal amount of Rs 5,000, which can go up to a maximum of Rs 10 lakh. For Axis Bank, the goal tenure is between three months and three years. Once you reach the goal, you would need to place an online request to close the account. The interest paid depends on the amount and tenure of your goal. Most banks don’t allow partial withdrawal.

These products are targeted towards technology-savvy customers, and are offered either on internet banking or mobile phones. When opening the account, the individual has to specify the targeted amount and the time he has to reach it. After this, you can easily monitor the total money saved, and how far you are from the goal. “Our product was designed keeping in mind millennials and their specific needs. One of them being the ability to plan for short-term goals scuh as buying a bike, or saving for their vacation, or making the first down payment for a home,” says Praveen Bhatt, head, digital banking and customer experience, Axis Bank.

For Axis ASAP, the top three goals of existing customers include vacation, down payment for home loans, and buying a vehicle. For HDFC Dream deposit, it’s children's education, wedding and holiday, while for ICICI Bank, the goals are home furnishing or renovation, kid's education, and saving for a kid’s birthday.

Financial planners also suggest it’s an alternative for risk-averse investors eyeing short-term goals. “The tax a person pays on RD, fixed deposit or debt funds is the same in the short-term — the gains are added to the income, and taxed based on the tax slab,” said Malhar Majumder, partner and consultant, Positive Vibes Consulting & Advisory. He also suggests that those looking for a goal of over one year and less than three years, can also look at arbitrage funds, which are more tax efficient, and have delivered around 6 per cent annual returns.