Which of the following is a common consequence if a depositor fails to make timely monthly installments in a Recurring Deposit account?

medium Q8 of 15

Financial Awareness - Risk, Stability & Emerging Finance

AThe account is automatically converted into a Savings Account

BThe deposit earns no interest at all

CA penalty or reduced interest may be applied

DThe deposit amount is immediately refunded

Step-by-Step Solution

Step 1: Understand Recurring Deposit rules
Recurring Deposits require regular monthly installments as per agreed terms.
Step 2: Identify consequences of default
If installments are missed or delayed, banks usually impose a penalty or reduce the applicable interest.
Final Answer:
A penalty or reduced interest may be applied → Option C
Quick Check:
Missed RD installment = Penalty / reduced interest ✅

Quick Trick: RD default = Penalty or lower interest

Common Mistakes:

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