Money Dec 6, 2012
ICICI Bank yesterday launched an online Flexible Recurring Deposit Scheme, 'iWish', aimed at encouraging a habit of saving among the young, aka the Facebook generation. While the intention sounds good, is it really something anyone should even consider? To know, read on.
What is it: It is a recurring deposit, which allows you to choose when and how much you can save. So, unlike a regular RD, you don't have to fix the amount to be deposited every month and the date the deposit will be made. To open an iWish account, you have to use your net banking facility. And even if you skip a payment for some reason, you won't be charged a fee, unlike the prevalent norm for RDs in general. So, in a way, this product offers flexibility.
How it works: With iWish, you have to simply choose a goal ('I Wish' to buy a car), a tenure by which you plan to meet the goal. And, contribute to the RD, any amount at any point in time. The minimum tenure is six months and maximum tenure is 10 years. The minimum amount needed to open the deposit is Rs 500. You can track your progress online and are permitted to make up to ten iWishes or RDs.
What's unique: You can choose to share your iWishes on Facebook and let your friends and family be a part of your savings goal by contributing towards your RD from their bank account using Visa debit card online.
What's the cost: If you are an ICICI Bank customer and have active net banking, you can simply log onto your net banking account and make this online Flexi-RD free of cost. But keep in mind that, if you choose to prematurely close the RD, but you will have to bear a cost, which is similar to the banks' regular RD.
Finer details: The interest you earn on this RD is in the range of 6.5-8.5 percent, which is similar to the bank's regular RD. And yes, you can close your goal midway. In such a case, you won't earn the interest rate as mentioned at the beginning, when you created the goal. However, you will earn interest at the rate corresponding to the period the goal remained with the bank. Not to mention the penalty that will levied for premature closure of the account.
Returns: Usually, RD is good to get a beginning for young people. But, as they say, good is usually the enemy of the best. So, while it may inculcate a habit of investing regularly, the returns you get from an RD are not out of the world. An SIP in a debt-oriented MF could probably give you slightly better returns. Of course, you will have to bear some risk.
Safety: While your goals are posted on FB, the actual banking transaction happens only on the ICICI Bank's online banking platform. So, from online safety point of view, this is as safe or vulnerable as a regular online banking transaction.
Psychological view point: Announcing your status on FB is one thing, announcing your financial goals is another. iWish gives you the facility to announce your financial goals selectively or not announce at all to FB friends or announce them to only select FB friends.
So, iWish might work only if you in the lowest tax bracket, have irregular cash flow and desperately need an RD.
To share on FB or not is entirely your call. We would not recommend it. May be sharing about your weight loss goal on FB works well, but letting the world know the percentage of funds you have managed to gather towards the goal may not be too safe.
To see how this RD works view the demo here.
More From Bindisha Sarang.