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Understanding the Post Office Recurring Deposit Account (RD)

Table of Contents

  1. Introduction
  2. What is a Post Office Recurring Deposit Account?
  3. Who can open
  4. Deposits
  5. Default
  6. Advance deposit
  7. Loan
  8. Premature Closure
  9. Maturity
  10. Repayment on the death of account holder
  11. Conclusion

1. Introduction

In a world where numerous investment options exist, it's easy to overlook traditional yet reliable avenues for savings.

One such time-tested approach is the Post Office Recurring Deposit Account (RD).

While modern financial products like mutual funds and stocks dominate the headlines, RD accounts offered by the Post Office continue to cater to a substantial segment of the population, especially those seeking a secure and predictable way to save money.

2. What is a Post Office Recurring Deposit Account?

The Post Office Recurring Deposit Account, commonly known as the RD account, is a savings scheme offered by the Indian Postal System.

It aims to encourage regular savings by individuals, especially those with fixed monthly incomes.

RDs are a type of term deposit where the depositor contributes a predetermined amount each month, and the account matures after a fixed period, typically ranging from 5 to 10 years.

3. Who can open

  • a single adult
  • Joint Account (up to 3 adults) (Joint A or Joint B)
  • a guardian on behalf of minor
  • a guardian on behalf of a person of unsound mind
  • a minor above 10 years in his own name.

Note: Any number of accounts can be opened.

4. Deposits

  • Account can be opened by cash/cheque, and in case of cheque, the date of deposit shall be the date of clearance of the cheque.
  • Minimum Amount for monthly deposit is Rs. 100 and above minimum in multiples of Rs. 10.
  • Subsequent deposit shall be made up to the 15th day of the month if the account is opened up to the 15th of a calendar month.
  • Subsequent deposit shall be made up to the last working day of the month if the account is opened between the 16th day and the last working day of a calendar month.

5. Default

  • If subsequent deposit is not made up to the prescribed day for a month, a default is charged for each defaulted month. Default @ 1 rupee shall be charged for 100 rupee denomination account (proportionate amount for other denominations) shall be charged.
  • If in any RD account, there is a monthly default, the depositor has to first pay the defaulted monthly deposit with default fee and then pay the current month deposit.
  • After 4 regular defaults, the account becomes discontinued and can be revived within two months from the 4th default. But if the account is not revived within this period, no further deposit can be made in such an account, and the account becomes discontinued.
  • If there are not more than four defaults in monthly deposits, the account holder may, at his option, extend the maturity period of the account by as many months as the number of defaults and deposit the defaulted installments during the extended period.

6. Advance deposit

  • If an RD account is not discontinued, the depositor can make an advance deposit up to 5 years in an account.
  • Rebate on advance deposit of at least 6 installments (inclusive of the month of deposit), for Rs. 100 denomination rebate Rs. 10 for 6 months, Rs. 40 for 12 months.
  • The advance deposit may be made at the time of opening the account or any time thereafter.

7. Loan

  • After 12 installments deposited, and the account is continued for 1 year not discontinued depositor may avail loan facility up to 50% of the balance credit in the account.
  • Loan can be repaid in one lump-sum or in equal monthly installments.
  • Interest on the loan will be applicable as 2% + RD interest rate applicable to the RD account.
  • Interest will be calculated from the date of withdrawal to the date of repayment.
  • In case the loan is not repaid till the maturity, loan plus interest will be deducted from the maturity value of the RD account.

8. Premature Closure

  • RD Account can be closed prematurely after 3 years from the date of account opening by submitting the prescribed application form at the concerned Post Office.
  • PO Savings Account interest rate will be applicable if the account is closed prematurely even one day before maturity.
  • No premature closure of the account shall be permissible until the period for which the advance deposits have been made.

9. Maturity

  • 5 years (60 monthly deposits) from the date of opening.
  • Account can be extended for a further 5 years by giving an application at the concerned Post Office. The interest rate applicable during the extension will be the interest rate at which the account was originally opened.
  • Extended account can be closed anytime during the period of extension. For completed years, RD interest rate will be applicable, and for the period less than a year, PO Savings Account interest rate will be applicable.
  • RD account can be retained up to 5 years from the date of maturity without deposit also.

10. Repayment on the death of the account holder

  • On the death of the account holder, nominee/claimant can submit a claim at the concerned Post Office to get the eligible balance of such RD account.
  • After the sanction of the claim, Nominee/legal heirs can continue the RD account till maturity by submitting an application at the concerned Post Office.

11. Conclusion

The Post Office Recurring Deposit Account (RD) is a tried and tested savings option that continues to hold its relevance in the fast-paced world of finance.

For individuals seeking a safe, predictable, and disciplined way to save money, the RD account is an excellent choice. Its simplicity, steady growth, and wide accessibility make it a preferred avenue for millions of Indians across the country.

While exploring various investment avenues, it is essential to consider the Post Office RD as a valuable addition to your financial portfolio.

Disclaimer: The information provided in this blog post is for general informational purposes only and should not be considered as professional advice. The schemes features, rules, and regulations may be subject to change, and readers are encouraged to verify the latest information from official sources or consult financial experts before making any investment decisions. The author and the website shall not be held liable for any losses or damages arising from the use of the information provided in this blog post.