A Recurring Deposit is a savings plan that offers a low level of risk & flexibility in choosing the amount & the tenure of investment. It can be availed in a flexible tenure ranging from 6 months to 10 years, allowing you to create a short or long-term corpus. The minimum amount to start with the deposit is as low as INR 100 per month, according to your budget.
Post Office Recurring Deposit Scheme is backed by the Government of India, offering guaranteed returns, & best suits risk-averse investors. Not being linked to market fluctuations, this scheme is considered to be the most trusted Saving Schemes in India, offering a secure way to build a corpus with the help of regular & consistent deposits. It involves investment for up to 5 years, offering stable returns & earning interest compounded quarterly.
Features of a Post Office Recurring Deposit Scheme
Provided are the features of the Post Office recurring deposit scheme:
Interest Rate:
The interest rate in the case of PORD is 6.7% per annum, compounded quarterly, ensuring stable returns.
Investment Tenure:
Its tenure is as long as 5 years, i.e. 60 months, which makes it a mid-term investment plan.
Minimum Deposit:
The minimum deposit amount is INR 100.
No Upper Limit:
There is no maximum investment limit, making it flexible enough to allow you to save according to your financial capacity.
Multiple Payment Options:
It accepts multiple modes of payment, including cash, cheque, & online transfer to transfer funds at your nearest post office.
Advance Deposits Allowed:
It also accepts monthly deposits for up to 5 years in advance to avoid any hassles.
Quarterly Compounded Interest:
The interest amount is compounded on a quarterly basis, earning interest on interest.
Reasons to Choose the Post Office Recurring Deposit Scheme
Provided are the reasons to choose the post office recurring deposit scheme:
- Government-Backed Security
Under this plan, your savings are totally secure as they are backed by the Government of India & regulated by the Indian Post. This Savings Plan does not include any fear of losing the principal sum as recurring deposit offers a guaranteed return, being not linked with the market.
Ideal for Small & Mid-Sized Savings
This plan best suits small & mid-sized investors as it allows the minimum deposit amount to be as low as INR 100 per month. Whether you’re a housewife, a student, or a professional, you can save in this scheme without worrying about your financial budget.
Assured Growth with Compounded Interest
Under this plan, the interest amount gets compounded on a quarterly basis, assuring growth. This means you can earn interest on interest throughout the tenure, resulting in high returns.
Flexible & Easy to Operate
Opening a recurring deposit has become an easy affair, as it allows funds to be deposited through cash, cheque, online, etc. Additionally, some post offices also offer an auto-debit facility, which reduces the chances of missing payments.
Helps Build a Savings Habit
This helps build a habit of savings as a particular amount is to be deposited every month, which helps encourage disciplined savings.
Option for Joint & Minor Accounts
This savings plan allows opening minor accounts (for children 10 years & above), joint accounts (Up to 3 adults), guardian-operated accounts (for individuals & minors of unsound mind).
Loan Facility Against Your RD
This plan allows you to avail a loan in case of any emergency situation, up to 50% of the amount deposited. This means you do not need to withdraw funds prematurely, which helps you meet these unexpected expenses.
No Market Risk, Only Guaranteed Returns
These plans are not associated with the market, hence offer guaranteed returns, unlike stocks, mutual funds, or any other plans. This makes it best suited for risk-averse investors who look for stable returns without any uncertainties.
Encourages Long-Term Financial Planning
It helps you plan for the long term since the policy tenure is 5 years, which helps to meet commitments such as a child’s education, creation of an emergency fund, planning a house or car. This long-term planning helps you receive substantial returns at the time of maturity & lets you meet your family’s milestones.
How to Open a Post Office Recurring Deposit Account?
Provided are two ways to open a post office recurring deposit account:
Online Mode
- The Indian Post Payments Bank application must be installed.
- Input the details required, such as Pan number, mobile number, etc.
- Enter the OTP received to verify the mobile number & get the post office savings account.
- Enter the Aadhar card number along with the OTP received to verify it.
- Fill out the online application form, which includes personal details, account details, communication details, nominee details, etc.
- Once the form is submitted, the PORD gets opened.
- A customer ID along with an account number will be provided.
- The customer ID will be used to generate your login PIN.
Offline Mode
- Visit your nearest post office.
- Check out the recurring deposit application form.
- Fill out the application form with all the relevant details.
- Submit it along with the documents required.
- Additionally, the RD form, along with the initial deposit amount, is to be submitted to get the PORD account opened.
How to Calculate Returns on Post Office Recurring Deposit Scheme
The interest earned on PORD is compounded on a quarterly basis, which means the interest is paid on the total of the principal amount together with accumulated interest. The formula to calculate it is:
M = R [(1 +i) ^ n – 1] / (1 – (1 + i) ^ (-1/3)],
Where,
M = Maturity Value
R = Monthly EMI
n = Number of Quarters
i = Interest Rate
Let us understand the same with an example,
Mr. X deposited INR 5000 in a recurring deposit account opened with a bank at an interest rate of 7.5% per annum. The amount to be received on maturity can be calculated as follows:
M = R [(1 + i) ^ n – 1] / (1 – (1 + I) ^ (-1/3)],
= 5000 [(1+0.075) ^ 4 -1] / (1-(1+0.075) ^ (-1/3)]
= INR 62,478.46
Conclusion
Post Office Recurring Deposit is a brilliant choice for those who want a secure & disciplined savings account along with guaranteed returns. Whether you are a student, housewife, retiree, or a student, this plan helps you build a financial future & provides you with mental peace.
