Post Office Recurring Deposit (RD) scheme is offered by the Indian Postal Service. It is a savings scheme that allows individuals to invest small amounts of money regularly and earn fixed interest rates on their investments. Investors can open a Post Office RD account with a minimum monthly deposit of just Rs. 100. The scheme offers a flexible tenure of 5 years, along with a fixed interest rate and several other benefits such as loan availability, nomination facility.
Similarly, fixed deposits offer a safe and reliable way to grow your savings. Like RDs, they offer guaranteed returns, making them an ideal choice for those who prioritise safety and stability.
Post Office RD interest rates 2024
Tenure |
Normal Citizen RD Rate |
Senior Citizen RD Rate |
1 Year |
6.90% |
6.90% |
1 Year to 3 Years |
7.00% |
7.00% |
3 Years to 5 Years |
7.50% |
7.50% |
Post Office RD scheme details
- Tenure: Fixed at 5 years.
- Interest Rates (Public): Ranges between 6.90% and 7.50%.
- Interest Rates (Senior Citizens): Also ranges between 6.90% and 7.50%.
- Minimum Deposit Amount: Starts at ₹100.
- Premature Withdrawal Penalty: 1.80% is applicable on premature withdrawals.
- Highest Public Interest Rate: 7.50%.
- Highest Senior Citizen Interest Rate: 7.50%.
This scheme provides a secure and reliable option for individuals seeking consistent returns over a medium-term investment horizon.
Features of Post Office RD scheme
- Investors can open RD account with a minimal monthly deposit of just Rs. 100, and there is no upper limit. Deposits can be made through cash or cheque.
- When the Post office RD is opened under the name of a minor, it can be jointly operated by two individuals. For those above 18 years old, the account can be managed by the primary applicant either individually or jointly.
- The RD scheme offers a fixed interest and interest is compounded quarterly.
- Applicants have the option to designate a nominee who receive the payout in the case of their demise.
- Account holders have the option of transferring funds from their RD to their savings account.
- Individuals have the choice to opt for a rebate on deposits made in advance, with the facility limited to 6 instalments only.
- The Post Office RD permits applicants to withdraw funds after 3 years from the date of account opening. This can be done by submitting the necessary application form to the relevant post office.
- After 12 instalments if the account remains active for a year. The account holder becomes eligible for a loan up to 50% of the account's credit balance. The loan can be repaid either in full at once or through equal monthly payments, with the interest rate calculated as 2% plus the applicable RD interest rate.
Calculating returns in Post Office Recurring Deposits (RDs)
The interest earned on a Post Office Recurring Deposit (RD) is compounded, meaning interest is paid on both the principal amount and the accumulated interest from previous periods. To calculate the maturity amount in a Post Office RD, we can leverage the following compound interest formula:
A = P x (1 + R/N) ^ (N*t)
Where:
- A = Maturity amount
- P = Monthly deposit amount
- R = Annual interest rate (as a decimal)
- N = Number of times interest is compounded in a year (typically monthly, so N = 12)
- t = Tenure in years
Example:
Consider Mr. K who invests Rs. 6,000 every month in a Post Office RD for a tenure of 5 years (60 months) at an interest rate of 7.2% p.a. (per annum). Let us calculate the maturity amount using the formula:
A = 6,000 x (1 + 0.072 / 12) ^ (12 * 5)
Maturity amount ≈ Rs. 4,33,883
In this example, Mr. K would earn approximately Rs. 25,90.73 in interest over the 5-year tenure.
Components of the Recurring Deposit (RD) interest rates in Post Office 2024
1. RD tenure
Unlike many banks, post office RDs offer a fixed tenure of 5 years. This makes them ideal for individuals seeking a medium-term investment option to build a corpus for foreseeable future needs. Account holders must maintain their RD account for the entire 5-year period. However, there's an option to extend the account for another 5 years in increments, bringing the maximum tenure to 10 years.
2. Minimum and maximum deposit
Recurring deposits are popular for their accessibility and potential for steady returns. Recognizing this, the post office has set a low minimum monthly deposit of just Rs. 10. This caters to individuals who may be hesitant about committing a large sum upfront. There's no upper limit on the maximum deposit amount, allowing flexibility for those who can invest more. Deposit increments must be in multiples of Rs. 5.
3. Deposit dates
A post office RD requires 60 deposits over the 5-year tenure, translating to one deposit every month. The initial deposit occurs when the account is opened. Subsequent monthly deposits need to be made on or before a specific date, which depends on the account opening date.
For accounts opened between the 1st and 5th of a month, monthly deposits are due on the same date throughout the 5 years. However, for accounts opened after the 15th, deposits are due between the 16th and the last day of each subsequent month. Deposits can be made via demand draft, pay order, or cheque.
4. Penalties for delayed deposits
Post office RD accounts allow a maximum of four missed deposits. Failure to make the fifth consecutive monthly deposit results in account inactivation. These inactive accounts can be revived within two months of the missed fifth deposit.
A penalty of 5 paise is charged for every Rs. 5 of the missed deposit amount. This penalty is levied in addition to the missed deposit and must be paid to reactivate the account.
5. Post Office RD rebate
To incentivize upfront deposits, the post office offers a rebate on advance deposits. While the rebate amount may not be significant, it can contribute to small savings over time.
Additional read: Post Office Saving Schemes
