In a recent development, the Ministry of Finance has revealed the changes in the interest rates of small savings schemes for the July-September quarter.
Increased Interest Rate For Post Office Recurring Deposit
Ofcourse, the 5 years recurring deposit has been made more attractive, as per this latest update.
To our surprise, its interest rates have increased by a whopping 30 basis points.
So now, the interest on post office recurring deposits stands at 6.5 percent instead of the earlier 6.2 percent.
Besides this change, the interest rate on time deposits of 1 year and 2 years has also been changed.
It has been increased by 10 basis points.
Basically, this scheme is for medium term investors.
For this, the interest of 6.5 percent is available annually and its calculation is done on the basis of quarterly compounding.
For this scheme, a minimum amount of Rs 100 and thereafter any amount in multiples of Rs 100 can be deposited.
It is noteworthy here that recurring deposits at the post office are only for 5 years unlike banks.
But, if you are looking to extend it further then it can be extended again for 5 years.
Notably, you will get the benefit of old interest rates only during the extension.
Lets understand this with a simpler example.
For instance, if an investor deposits Rs 10 thousand every month, then after five years he will get Rs 7 lakh 10 thousand, as per the Post Office RD Calculator.
In this case, the total deposited capital stands at Rs 6 lakh and its interest comes at Rs 1 lakh 10 thousand.
If you are planning to open a Recurring Deposit account in the post office, it better be opened between 1st-15th of any month.
This is due to the reason that you will have to make a deposit by the 15th of every month.
Again, it will be quite comfortable considering the pay day usually comes during this period.
In case you open the account after the 15th in any month then you will have to pay the deposit by the last of every month.
Things To Remember Before Closing The Account
If you are wondering about this scheme, it also comes with a loan facility that is available after depositing 12 installments.
If you are choosing this option then you will have to consider that its interest rate will be 2 percent more than the RD account interest rate.
The most important point is in case you close this account even 1 day before 5 years, then only the benefit of savings account interest will be available.
Please note that the interest rate on savings accounts is 4 percent presently.
