Post office Recurring Deposits have become the most preferred instruments when compared to banks. One of the reasons behind its popularity is the attractive interest rate one can earn on them and a great profit upon maturity.
The interest rates are revised in a proper interval and a usual interest rate on a Post Office RD is 7.2% p.a. The interest is compounded quarterly which enables the money deposited multiplies till the maturity time.
Post Office Recurring Deposit Interest Rates – Special Features
- The interest rate provided by the Post Office on RD is 7.2% p.a. compounded quarterly.*
- The tenure of a post office RD is 5 years
- The minimum deposit to be made in an RD account is Rs. 10 per month
- There is a rebate provided on advanced deposits of at least 6 months
- There is no cap on the upper limit, provided it should be in multiples of 5
- The Post Office RD account can be transferred from one post office to another
- A joint account can be opened by two persons
- The penalty for missing a deposit is charged as 5 paise for every Rs. 5
*Note: The above-mentioned interest rate is applicable as of 1st November 2019. The rate of interest is subject to change and one must check the same before proceeding with an RD.
Post Office RD Tenure
Unlike the recurring deposit at banks, post office RD tenure is fixed, i.e. 5 years. Most people open an RD account to use it as immediate support in case of any inevitable emergency in the coming years making it an instrument being used as a medium-term investment option. Presently, an RD account in a Post office has a minimum tenure of 5 years, which means one needs to ensure that his/her account is active during this period.
If one wants to continue with the RD account even after 5 years, there is a provision for the same under which, the RD can be extended to 5 more years making the maximum tenure as 10 years. Moreover, RDs that have been extended by 5 more years will continue earning interest compounded quarterly as earlier.
Minimum and Maximum Deposit
A recurring deposit is one of the most preferred investment tools to earn good returns on your monthly investment. The minimum deposit is kept very low to ensure that it’s under the budget of people who are often skeptical about the deposit amount and rate of interest. As per the post office RD rules, the minimum deposit is Rs. 10 per month and the maximum deposit has got no limit. One can increase the deposit amount in multiples of Rs. 5, ensuring that they invest whatever amount is feasible.
Dates of Deposit
A post office RD requires a total of 60 deposits during the tenure, i.e. one deposit every month for 5 years. The first deposit is made when the user opens the account following the subsequent monthly deposits to be made on or before a particular date, depending on the date the account was opened.
Coming down to the exact dates, individuals who open their account between the 1st and 5th of a month must make the monthly deposits every month for the next 5 years. Accounts opened after the 15th of a particular month are needed to make the payments between the 16th and the last day of subsequent months. For making deposits, one can use the mode of demand draft, pay order or a cheque.
Penalties on Delayed RD Deposits
It’s possible to miss a monthly payment due to some reasons.
A post office RD allows the account holder with a maximum of 4 such defaults; in case he/she fails to make the 5th monthly payment in his/her account, the account becomes inactive (discontinued account). Such discontinued accounts can be revived within 2 months of the 5th default.
According to the post office RD rule, a default penalty of 5 paise is charged for every 5 rupees which is going to be deposited in the account. The bank charges this fine to be paid in addition to the previously missed deposit amount in order to activate the account.
Post Office RD Rebate
To lure people into depositing money in advance, a rebate on advanced deposits is provided by the post office RD. The rebates might not sum up to a big amount but can contribute to saving a considerable amount for other purposes. The details of the RD debate have been mentioned in the table below:
|Number of Advance Deposits||Rebate|
|More than 5 -Lesser than 11||Re 1 for every Rs. 10 deposited|
|More than 11||Rs. 4 for every Rs. 10 deposited – for 12 deposits|
Rs 1 for every Rs. 10 deposited after 12 months
Premature Withdrawal of Post Office RD
One can withdraw the permissible amount which is 50% of the balance after one year. However, it needs to be repaid in lump-sum along with the interest applicable.
Recurring deposits are one of the best ways you can achieve your long term financial goals with just a small part of your monthly earnings. On top of that, post office RD interest rates help you to save a substantial amount of money with the minimal deposit amount. However, if you are aiming for bigger returns on your investment, you should probably go with other investment vehicles such as Mutual funds, stocks, bonds, and others. It is advisable to read all the terms and conditions before opting for any investment.