Post Office RD Account: Nowadays, everyone seeks safe investment options. If you’re looking for a secure investment, this government scheme could be a good option. We are referring to the Post Office Recurring Deposit (RD) scheme. Like Fixed Deposits (FDs), this scheme is considered an excellent investment avenue. While FDs require a lump-sum deposit, RDs involve making fixed monthly deposits over a set period. Upon maturity, the RD funds are returned along with the accrued interest. RD facilities are available at both post offices and banks.
Investment Tenure
In banks, you can invest in an RD for terms of 1, 2, 3, or 5 years; however, the Post Office RD scheme requires you to make deposits continuously for 5 years. Nevertheless, the Post Office RD offers attractive interest rates—currently 6.7% per annum. Another advantage is the ability to take a loan against your deposits when you need it. Many people are unaware of this loan facility; let us explore it in detail.
Loan Facility on RD
Under the Post Office 5-year RD scheme, you become eligible for a loan facility after depositing 12 consecutive instalments. In other words, you must make deposits for at least one year to avail of this benefit. After one year, you can obtain a loan of up to 50% of the amount accumulated in your account. You can repay the loan either in a lump sum or through equal monthly instalments.
Interest Payable
The interest rate applicable to the loan amount is 2% above the interest rate earned on the RD account. Interest is calculated from the date of withdrawal until the date of repayment. If you do not repay the loan taken against the RD by the time it matures, the loan amount—along with the accrued interest—will be deducted from the maturity proceeds. To avail of the loan facility against an RD, you need to submit a filled-out application form along with your passbook at the post office.
Know the benefits of the Post Office RD
A Post Office RD account can be opened with as little as ₹100—an amount that is easily affordable for anyone to save. There is no upper limit on the investment amount. You also benefit from compound interest, calculated quarterly, which allows you to earn substantial returns over the five-year tenure.
An individual can open multiple accounts under the Post Office RD scheme. You can open accounts singly or jointly, and also in a child’s name. The standard maturity period for the RD account is five years, though premature closure is permitted after three years. The scheme also offers a nomination facility, and the account can be extended for another five years after maturity.