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As economy limps back to normalcy and incomes affected by COVID-19 become steady people are looking for safer options to save money. There are various schemes by banks and other financial institutions. However, some of the banks have also slashed the interest rate. Amidts this, savings schemes offered by Post Office has emerged a very good option.

Post Office schemes is best suited for those who believe in safer investments. While some banks offer better interest rates than the Post Office, its scheme is more reliable and flexible.

Here is all you need to know about 5-Year Post Office Recurring Deposit (RD) scheme:

Who should invest in Post Office Recurring Deposit scheme?

If you believe in safer investment options and are averse to taking risks, this is a perfect scheme for you.

A single adult, Joint Account (up to 3 adults), a guardian on behalf of minor, a guardian on behalf of person of unsound mind, a minor above 10 years in his/her own name can open any number of accounts.

Minimum amount needed for opening of Post Office RD account

Minimum Rs 100 per month or any amount in multiples of Rs 10. There is no maximum limit. Account can be opened by cash or cheque.

When do you make the deposit every month?

Subsequent deposit have to be made up to 15th day of month, if account is opened up to 15th of a calendar month. Deposit will have be made up to last working day of month, if account is opened between 16th day and last working day of a calendar.

What is the interest rate offered by Post Office on RD Scheme?

From April 1, 5.8% interest rate per annum is given by Post Office on RD schheme which is quarterly compounded.

Default on RD scheme

If a deposit for a given month is not made up to the prescribed day for a month, a default is charged for each defaulted month. The account holder will have to pay 1% of the scheme amount. (ii) After 4 regular defaults, the account becomes discontinued. It cab, however, be revived within two months from 4th default. If the account is not revived within this period, account is discontinued permanently.

Premature Closure

The Post Office aD Account can be closed prematurely after 3 years from the date of opening. In case of premature closure even one day before maturity, savings account interest rate will be applicable. Howeverm no premature closure of account will be allowed until the period for which the advance deposits have been made.

Maturity of Post Office RD account

The Post Office RD account matures in 5 years (60 monthly deposits) from the date of opening. RD account can be retained up to 5 years from the date of maturity without deposit also.

The account can be extended for further 5 years by giving application at concerned Post Office. Interest rate applicable during extension will be the interest rate at which account was originally opened. Extended account can be closed any time during the period of extension. For completed years, RD interest rate will be applicable and for a period less than a year, PO Savings Account interest rate will be applicable.

Maturity amount

If you invest Rs 10,000 every month for 10 years, you will get over Rs 16 lakh on maturity.

If you plan to invest Rs 10,000 every month for five years, you will get close to Rs 7 lakh on maturity.

An investment of Rs 5,000 per month for 10 years can fetch you more than Rs 8 lakh.

Loan facility for RD account holders

An RD account holder may avail loan facility up to 50% of the balance credit in the account after 12 installments for 1 year. Loan can be repaid in one lump-sum or in equal monthly installments. 7.8% interest rate will be applicable on the loan. Interest will be calculated from date of withdrawal to date of repayment. In case loan is not repaid till the maturity, loan plus interest will be deducted from the maturity value of the RD account.

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