Definition: The Post Office Recurring Deposit Account works on the same principle as that of the recurring deposit account in a bank, where the investor can deposit a fixed sum of money on a monthly basis. It is a scheme offered by the department of post and backed by the government of India on which fixed interest is paid.
The salient features of the Post Office Recurring Deposit Account are:
- The rate of interest is 4% p.a. (W.e.f. 1 April 2016) compounded quarterly and payable annually.
- The tenure of the scheme is 5 years and on maturity INR 10/- per month fetches INR 726.97. The account can be further continued for the next five years on year to year basis.
- The minimum amount of investment is 10 and in the multiples of Rs. 5 thereof. There is no limit on maximum deposit.
- If the account is opened up to the 15th day of the month, then the subsequent deposits can be made until the 15th working day of the next month and up to last working day of the next month if the account is opened between the 16th day and the last working day of the month.
- In case the subsequent deposit is not paid on the prescribed date, then a default fee is charged for every default made by the investor. The default fee @ 5 paise for every five rupee shall be charged.
- In the case of four subsequent defaults, the account deactivates and can be revived in two months, if not so, then no further deposits can be made. To revive an account, the depositor has to pay the defaulted monthly deposit first along with the default fee and then the current month’s deposit has to be paid.
- A rebate is given on an advance deposit of at least six installments.
- The premature withdrawal up to 50% of the balance amount is permissible after 1 year.
- The account can be opened either individually or jointly by two adults. An account in the name of a minor can also be opened and a minor of the age of 10 years or above can open and operate the account. But after attaining the maturity, a minor should apply for the conversion of the account in his name.
- In the event of the death of the depositor subject to the fulfillment of certain conditions, the maturity value allowed on the account is restricted to that of INR 50 denominations.
Note: In case the deposit is made by cheque, then the date on which the amount gets credited to the government account will be treated as a date of deposit.