Post Office Scheme: The government has decided to keep the interest rates on small savings schemes unchanged for the period of October to December (Q1FY27). This means you will continue to enjoy the same interest rates as before. So, if you’re considering a recurring deposit (RD), a Post Office RD could be a great option for you.
Key Takeaways
Quick Read- Post Office RDs are backed by the Government of India, so there's no fear of losing your money. This is ideal for those who are risk-averse.
- Every month, you have to deposit a little (starting from a minimum of Rs 100), which helps in inculcating the habit of saving.
- Currently, you earn 6.7% annual interest, which increases with compounding. This is a much better return than a bank savings account.
- Flexible investment: You can start with as little as Rs 100, with no upper limit. You can choose the amount that suits your pocket.
It provides an annual interest rate of 6.70%. By saving Rs 2,000 each month for 5 years, you can accumulate a total of Rs 1,43,000. Here, we will explain more about Post Office RD…
What is RD?
A Post Office Recurring Deposit (RD) is a fantastic way to save money. Just deposit a fixed amount every month along with your salary, and you’ll have a nice sum when it matures after five years. Unlike a home piggy bank that doesn’t earn interest, money deposited here earns a good amount of interest.
By investing Rs 1,000 every month for 5 years, you can build a fund of approximately Rs 71,000. If you choose to invest Rs 1,000 monthly in a Post Office RD, at the annual interest rate of 6.7%, it will grow to around Rs 71,000 by the time it matures after 5 years.
You can also take a loan against the money you have deposited in your RD. There is a loan facility available for RDs. This means that if you find yourself in need of cash at any point, you can borrow against it without having to break your RD. The interest rate on this loan is lower than that of a personal loan.
If you make 12 consecutive deposits in a five-year Post Office RD, you can access the loan facility. To qualify for this, you need to make continuous deposits for at least one year. After that, you can borrow up to 50% of the balance in your account.
When you take a loan against your RD, the interest charged will be 2% plus the applicable interest rate on your RD account. For instance, RDs currently offer a 6.7% interest rate. If you take out an RD now, the loan will be at an interest rate of 8.7% per annum.
5 Benefits of RD
- Post Office RDs are backed by the Government of India, so there’s no fear of losing your money. This is ideal for those who are risk-averse.
- Every month, you have to deposit a little (starting from a minimum of Rs 100), which helps in inculcating the habit of saving.
- Currently, you earn 6.7% annual interest, which increases with compounding. This is a much better return than a bank savings account.
- Flexible investment: You can start with as little as Rs 100, with no upper limit. You can choose the amount that suits your pocket.
- If you need money in an emergency, you can take a loan against your RD. This is useful if you don’t want to break the scheme.
Who can open an account?
Anyone can open an RD account. This account can also be opened in the name of minor children. If you are 10 years of age or older, you can operate it yourself. Three people can also open a joint account. You can open an account through any post office.