Under 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 consisting of the interest added to the deposit amount.
If you're looking for a safe investment and want to build a corpus by saving small amounts each month, the Post Office Recurring Deposit Scheme could be a good option. The government hasn't made any changes to small savings scheme interest rates for the October-December quarter, so Post Office RD continues to offer an annual interest rate of 6.70 percent. Post Office RD is a scheme that allows you to build a substantial corpus over five years by depositing a fixed amount each month. It's considered beneficial for those seeking safe returns while remaining risk-averse.
First of all understand what is Post Office RD?
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 6.70 percent annual interest, this amount becomes approximately ₹1.43 lakh at maturity. Investing ₹1,000 every month will generate a fund of approximately ₹71,000 after 5 years.
Loan facility is available on RD
A unique feature of Post Office RDs is that loans can also be taken against the deposited amount. If you've paid installments for 12 consecutive months, you can take a loan up to 50% of your deposit. This doesn't require discontinuing your RD account. The interest rate on this loan is two percent higher than the RD interest rate. This means that currently, a loan against an RD would 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's no risk of losing money. Depositing a small amount each month helps cultivate a habit of regular savings. Furthermore, it offers a 6.70 percent annual interest rate with compounding, which is better than a savings account. Investments can begin with a minimum of ₹100, with no maximum limit. Furthermore, loans against RDs are also available in case of emergencies.
Who can open an account in RD?
Anyone can open a Post Office RD account. A child aged 10 years or older can operate it on their own. Three people can also open a joint account. This account can be opened at any post office in the country. The minimum investment in a Post Office RD is ₹100, and the amount can be increased in multiples of ₹10 thereafter. 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.
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