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The Post Office Recurring Deposit Scheme requires you to deposit a fixed amount every month. This term is usually 5 years. Upon maturity, you receive a free deposit by adding interest to the deposit amount.

If you are looking for a safe investment and want to build a corpus by saving small amounts every month, the Post Office Recurring Deposit Scheme could be a good option for you. The government has not made any changes to the interest rates on small savings schemes for the October-December quarter, so the Post Office RD continues to offer an annual interest rate of 6.70%. The Post Office RD is a scheme that allows you to build a substantial corpus over 5 years by depositing a fixed amount every month. It is considered beneficial for those who seek safe returns while remaining risk-averse.

First, understand what a Post Office RD is.

In the Post Office Recurring Deposit Scheme, you have to deposit a fixed amount every month. This period is usually 5 years. Upon maturity, you receive a free deposit by adding interest to the deposited amount. It is believed that investing here, rather than keeping money in a piggy bank, also provides the benefit of interest. If you deposit ₹2,000 every month in a Post Office RD, your total investment will be ₹1.20 lakh in 5 years. At an annual interest rate of 6.70 percent, this amount becomes approximately ₹1,43,000 at maturity. Investing ₹1,000 every month will generate a corpus of approximately ₹71,000 after 5 years.

Loan facility available on RD

A special feature of Post Office RD is that loans can be taken against the deposited amount. If you have paid the installments for 12 consecutive months, you can take a loan of up to 50 percent of your deposit. This does not require discontinuing your RD account. The interest rate on this loan is two percent higher than the interest rate on RDs. This means that currently, a loan against an RD will result in an annual interest rate of approximately 8.7 percent, which is significantly lower than a personal loan.

Benefits of Post Office RD

Post Office RD is a scheme backed by the Government of India, so there is no risk of losing money. Depositing a small amount every month helps develop the habit of regular savings. Additionally, it offers a 6.70 percent annual interest rate with compounding, which is better than a savings account. Investments can be started with a minimum of ₹100, with no maximum limit. Furthermore, a loan against RD is also available in case of an emergency.

Who can open an RD account?

Any individual can open a Post Office RD account. A child aged 10 years or older can operate it independently. Three people can also open a joint account. This account can be opened at any post office in the country. The minimum investment in Post Office RD is Rs 100, and the amount can be increased thereafter in multiples of Rs 10. If the account is opened between the 1st and 15th of the month, the installment must be deposited by the 15th of each month. If the account is opened after the 16th, the installment must be deposited by the last day of the month.