Post Office Recurring Deposit Scheme: Features, benefits, interest rate; 10 things to know

India Post, run by the Ministry of Communications, offers 9 small savings investment schemes, which include the Post Office Recurring Deposit Account. These investment schemes are also known as small savings schemes and are backed by the government.

RD is used as a medium-term investment option and investors opting for Post Office RD need to ensure that their deposits are active for a minimum of 5-year period.

Experts suggest investors looking to invest small fixed amounts of money at regular intervals can opt for a 5-year post office RD account. For every Rs 5 of deposit, there is a default fee of Rs 0.05 that is charged. Also, there is no limit on the number of accounts that can be opened. However, after four regular defaults, the account will automatically be discontinued, but one can revive it within two months.

The interest rate offered on these schemes is reviewed every quarter by the government. Investors are offered a rebate on the deposits made in advance six months or more from the due date. The Recurring Deposit account can be extended post maturity, for another 5 years.

Find out the features and benefits of the Post Office Recurring Deposit Scheme, before investing in it: 

  1. Interest rates offered is 7.2 per cent per annum, compounded quarterly, starting from July 1, 2019. For instance, if you invest Rs 10 for 5 years, on maturity the account will fetch you Rs 725.05, on your total deposit of Rs 600.
  2. The RD account can be opened either by cash or cheque. The scheme also provides a nomination facility, which can be selected both at the time of opening and also after opening of the account.
  3. An investor can open any number of accounts in any post office, which can also be transferred from one post office to another
  4. A Post Office Recurring Deposit Account can also be opened in the name of a minor. Also, a minor of 10 years and above age can open and operate the account by himself/herself. However, the minor has to apply for conversion of the account in his/her name, after attaining majority.
  5. Account deposits can be made till the 15th day of next month if the account is opened within 15th of a calendar month. Similarly, deposits can be made up to the last working day of next month if the account is opened between the 16th day and the last working day of a calendar month.
  6. If depositors fail to make the subsequent deposit within the prescribed day, a default fee of Re 0.05 for every Rs 5 is charged for each default. However, after four regular defaults, the account is automatically discontinued and can be revived within 2 months, but if it is not revived within the 2 months period, no further deposit can be made.
  7. Investors are also offered a rebate on advance deposit of at least 6 installments. On deposits made in advance, six months or more from the due date, the rebate is offered to depositors.
  8. While a joint account can be opened by two adults, a single account can also be converted into a joint account and vice versa. Also, this scheme offers no tax rebate and the interest is fully taxable.
  9. After one year depositors can withdrawal up to 50 per cent of the balance. Along with interest at the prescribed rate, the amount can be repaid in one lump sum, any time during the tenure of the account.

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