What is a Systematic Deposit Plan (SDP) and Why Invest in It?

A Systematic Deposit Plan, full form of SDP, is an investment option that allows you, as an investor, to invest small amounts regularly. It is a type of Recurring Deposit (RD) that allows you to make small deposits rather than investing a lump sum in a Fixed Deposit (FD).

 

It also allows you to set up automatic monthly deposits, hence you don't have to worry about adding money every time.

Systematic Deposit Plan works like an RD, where the monthly deposits you make earn interest rates that are comparable with the prevalent FD rates.

 

As compared to an RD, SDP is more flexible and earns higher returns as each of the SDP is considered as a Fixed Deposit.

 

SDP makes it easier to save money in smaller portions, instead of waiting for a lump sum amount to be added to an FD account. In Systematic Deposit Plans, every deposit you make is treated as a new FD. Hence, the interest you get on every new deposit is calculated on the prevailing interest rate the day the deposit is made.

Before you start saving through a Systematic Deposit Plan, it’s important to review the tenure options and applicable SDP interest rates. 

 

Here’s the latest rates applicable on a Bajaj Finance Systematic Deposit Plan:

*Disclaimer: Interest rates mentioned in the table correspond to the rates as on 17th September, 2024. The rates are subject to change at the discretion of the lender. 

If you wish to see your money grow at a higher rate of interest, you can opt for any one of the following special tenures and earn cumulative returns.

 

Here’s the latest special interest rates applicable on a Bajaj Finance Systematic Deposit Plan:

*Disclaimer: Interest rates mentioned in the table correspond to the rates as on 17th September, 2024. The rates are subject to change as per the discretion of the lender.

It is important to estimate your returns from SDP before you opt for it. A Systematic Deposit Plan single maturity scheme calculator helps evaluate your earning for a given tenure with all your deposits maturing on the same day. 

 

You can access an SDP calculator online and plan your financial portfolio better.

 

You can use this digital tool as follows:

1. Select the applicable customer type (senior citizen and non-senior citizen)

2. Input your monthly investment amount

3. Pick a desired tenure for your SDP

4. Pick the number of deposits from the drop down menu

 

The SDP calculator will automatically display your maturity amount, interest earned and maturity date.

The key difference between the Monthly Maturity Scheme and Single Maturity Scheme lies in the frequency of deposit maturities, offering either monthly payouts or a lump sum at the end of the tenure.

 

Here’s a table that compares both the maturity schemes:

Monthly Maturity Scheme

Under the Monthly Maturity Scheme, you can pick a tenure ranging from 12-60 months and make your deposits in 6 to 48 instalments. However, this selected tenure is applicable to each new deposit. 

 

The returns from the deposit is payable when the said deposit matures as per the applied tenure. This type of Systematic Deposit Plan brings you the benefit of assured and steady monthly returns.

 

Say for instance, you’ve picked a tenure of 2 years and decided to complete your investment in 7 deposits. Then your returns will be scheduled as: 

*Standard tenure applicable to all deposits. 

Single Maturity Scheme

With a Single Maturity Scheme, the returns from the amount that you invest over time is paid to you in a single slot at the time of maturity. In other words, every deposit you make has the same maturity date under this plan. 

 

This helps you acquire a large lump-sum corpus at the end of the tenure. The investment tenure for such Systematic Deposit Plans range from 19 to 60 months and the number of deposits you can make varies from 6 to 47. 

 

Say, for instance, you choose to invest in a Single Maturity Systematic Deposit Plan for 2 years in 6 instalments, then your maturity schedule will look like this: 

*Subsequent deposit tenures reduce with the progression of the plan to ensure all deposits mature on the same day.

Low Starting Amount

You don’t need to save up a sizable sum to invest in an FD. Instead, you can start a Bajaj Finance Systematic Deposit Plan with a small sum of just ₹5,000 and a PNB SDP with just ₹100. You can invest the amount every month to build a sizable corpus overtime.

Investment Flexibility

Bajaj Finance offers tenures varying from a minimum of 12 months to a maximum of 60 months, while for PNB SDP the minimum tenure is of 6 months and a maximum of 60 months.

 

Depending on your investment goals, you can pick a favourable tenure. You can choose a shorter tenure for short-term goals or opt for a long tenure and enjoy the benefits of compounding. Apart from flexibility in terms of the investment tenure, you also get to pick the number of deposits (6-48) you wish to make to the account.

High Returns

A systematic planning through SDP allows you to enjoy high returns as each deposit you make grows as per the latest interest rate. Depending on your customer profile, you can get  interest rates as high as 8.65%. Additionally, you can also get higher returns from Bajaj Finance’s special interest rates for special tenures of 18, 22, 33, 42 and 44 months. Moreover, if you qualify for the senior citizen rate, you can enjoy an additional 0.25% on the general interest rate.

Premature Withdrawals

If you require immediate funds, you can also withdraw from your Systematic Deposit Plan. You can withdraw one or more deposits, but only if the FD has completed three months since its booking date. Although, there may be penalty charges applicable on such withdrawals.

Payout Options

You can get two types of payout options with a Systematic Deposit Plan. The Monthly Deposit Plan allows you to enjoy monthly returns, while the Single Maturity Deposit Plan makes you eligible for a one-time payout at maturity.

No Bounce Charges

With a Systematic Deposit Plan from lenders like Bajaj Finance and PNB, you won’t have to pay a bounce charge on a missed monthly payment. This means that you won’t have to shoulder extra expenses at a time when you’re already dealing with a cash crunch.

Loan-worthy Plans

Much like FDs, Systematic Deposits are also loan-worthy. In other words, you can utilise the value of your SDP to secure a loan or get an overdraft facility. 

Convenient Payments

Thanks to the completely digital application process, starting an SDP is easy and hassle-free. Once you’ve deposited the first instalment via cheque, you can sign a NACH mandate for auto-deductions from your account on the 3rd, 7th or 12th of every month.

Secured Investment

Unlike SIPs that have market-related risks, a SDP is a plan that comes with stable return benefits. Moreover, if you start your SDP with reliable lenders which are CRISIL and ICRA-approved, you don’t have to worry about the safety of your funds.

To be eligible for investing in an SDP, you should- 

• Be an Indian resident 

• Be 18 years or above

• Have KYC documents like Pan card/Aadhaar Card/passport/voter’s ID, etc.

• Have proof of address like utility bills, municipal tax receipt, etc.

 

Here is the list of additional documents required for the same:

• Recent passport-sized photograph

• Income proof (if applicable) like salary slips for the last three months or Income Tax Return (ITR) for the last financial year

• Completed Know Your Customer (KYC) form 

• NACH mandate form 

 

Note: SDP accounts can also be opened on both an individual and joint basis. There are special guidelines for minors opening SDP accounts.  

• Risk Tolerance

Assess your risk tolerance to determine your comfort level as SDPs are more suitable for conservative investors

• Investment Goals

Define your investment objectives, as whether you require short-term savings, long-term wealth accumulation, or specific financial objectives, as this will help you deciding the tenure

• Market Conditions

Be alert and well-informed about the latest market developments, along with interest rate changes

• Fees and Costs

Check for any maintenance fees or penalties for early withdrawal are associated with the SDP

• Liquidity

Check for the form of liquidity available, as SDPs typically have a lock-in period. This means funds might not be accessible until maturity, which may not suit you if you need immediate funds.

• Research

Conduct thorough research on different banks offering SDPs. Compare interest rates, terms, and additional features, to find the best option that meets your needs.

• Time Horizon

SDPs usually have fixed tenures ranging from 12 to 60 months, so ensure that this aligns with when you expect to need the funds

• Diversification

While SDPs give stability and predictable returns, see if the SDP fits into your overall investment portfolio