Nowadays, people are looking for investment options where their money is safe and also provides good returns over time. Government savings schemes are popular among investors for this very reason. The Post Office Recurring Deposit (RD) scheme is one such plan where regular investment can help build a substantial fund in the long run. This scheme is especially beneficial for those who want to achieve a big goal through small savings.

The Post Office RD scheme is a government-backed savings option and offers a fixed interest rate on investments. The scheme usually has a tenure of 5 years, which investors can extend if they wish.

Current Interest Rate and Scheme Highlights

Currently, the Post Office RD scheme offers an annual interest rate of approximately 6.7 percent. This interest rate is determined by the government and is subject to change from time to time. The scheme has a tenure of 5 years, and investments can start from as low as Rs. 100.

In this scheme, interest is compounded quarterly, meaning that interest is added every three months, leading to higher returns over the long term.

Who Can Open an RD Account?

Any adult can open an account under this scheme. Both single and joint accounts are available. There is no maximum investment limit, so individuals can invest according to their capacity.

Loan Facility and Other Benefits

Investors in the RD account also get a loan facility. Generally, after depositing 12 instalments and keeping the account active for one year, a loan of up to approximately 50 percent of the deposited amount can be availed. The interest rate on this loan is about 2 percent higher than the RD interest rate.

In addition, the scheme also offers a premature closure facility after 3 years.

How to Build a Fund of Rs. 5 Lakh from Interest Alone

If a person saves approximately Rs. 333 daily, they can invest about Rs. 10,000 per month. If this investment is continued for 5 years, the total investment could be approximately ₹6 lakh. At an interest rate of 6.7 percent, it could earn over ₹1.1 lakh in interest, and the total amount could exceed ₹7 lakh. This calculation is an estimate based on the interest rate and compounding.

If the investment is extended for another 5 years, the benefit of compounding interest can increase significantly over the long term, and the total interest earned could reach several lakhs of rupees. This depends on whether the interest rate changes.

Why is long-term investment considered beneficial?

The Recurring Deposit (RD) scheme helps in developing a habit of regular saving. It is not subject to market risks, and being government-backed, the investment is considered safe. For this reason, this scheme is considered ideal for investors who want to minimise risk and prefer a fixed return.

About the Author

Rohit P

My name is Rohit Pal, and I have been working in the field of journalism for the past five years. During this time, I have written on a variety of topics, including business, automobiles, technology, and politics. I have worked with several major organizations and am currently working with Timesbull.

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