The Recurring Deposit can be funded by [Standing order (banking)|Standing instructions]
which are the instructions by the customer to the bank to withdraw a certain sum
of money from his Savings/ Current account and credit to the Recurring Deposit every
month.
When the RD account is opened, the maturity value is indicated to the customer assuming
that the monthly installments will be paid regularly on due dates. If any installment
is delayed, the interest payable in the account will be reduced and will not be
sufficient to reach the maturity value. Therefore, the difference in interest will
be deducted from the maturity value as a penalty. The rate of penalty will be fixed
upfront. Interest is compounded on quarterly basis in recurring deposits.