Flexi deposit schemes: Nine things you must know

Four major banks of the country – two public sector and two private sector – have brought a scheme for the common people that combined features of both recurring deposits and fixed deposits. It is called flexi deposit scheme.

It is a sort of recurring deposit (RD) facility, but with almost all the same facility of fixed deposits (FD). Besides SBI and Bank of India, ICICI and  Axis Bank offer this type of flexi deposit account.

But unlike an RD account, where you have to deposit a fixed instalment every month, the instalment in these flexi deposit schemes can vary. On the other hand, interest rate and loan facility are available like FDs.

Money9 gives you a nine-point easy understanding of this attractive flexi deposit scheme.

1. This scheme can be started with only Rs 500 per month, maximum cap for a financial year is limited to Rs 50,000.

2. In a financial year, the minimum deposit amount in this flexi deposit scheme is Rs 5,000.

3. Unlike RD, in this flexi deposit scheme one can put money anytime during a month and any number of times. The amount is also not fixed in every time.

4. The minimum tenure of this plan is five years and maximum seven years.

5. The interest rate of SBI flexi deposit is 5.4%, equal to the rate of term deposit of 5 years to 10 years. Like FD, senior citizens are eligible to get 0.5% more interest rate on this flexi deposit scheme.

6. The interest rate varies from bank to bank. Generally, in a flexi deposit account, banks offer a rate equal to that offered in term deposits between five and 10 years.

7. For deposits up to Rs 5 lakh, the penalty for premature withdrawal will be 0.50% for all tenors. For deposit above Rs 5 lakh, applicable penalty will be 1% across all tenors.

8. Tax deduction at source is applicable as per Income Tax Act 1961. Form 15G/15H can be submitted by the depositor to get exemption from tax deduction as per Income Tax Act.

9. One can get a loan or overdraft facility up to 90% of the total invested amount at any point of time during the tenor. A depositor can get a universal passbook from the bank along with anywhere transfer facility of the account. Nomination facility is also available in the flexi deposit scheme.

Expert speak

Personal finance experts are hailing this flexi scheme. This is one of the best safe and secure instruments along with the flexibility, they say.

“You will get both the advantages of a RD and FD with this scheme. Perhaps something more than that. This scheme is for very small and budding investors as well as ace investors,” said Narayan Jain, an income tax expert.

One can start this scheme anytime if he/she has a SBI, ICICI, Axis Bank or Bank of India savings account.