Recurring Deposit (RD) is a financial product that allows investors to save for the future by investing fixed but small amounts at regular monthly intervals.
In case of financial crises and sudden money needs, you can opt for partial withdrawals of the account balance, and pay it later or get your money with post office RD premature closure.
In case you have decided to close your account, then you need to know some rules for a smooth closure process.
The Post-Office Recurring Deposit (RD) Account needs a minimum tenure of 3 years; before it can be processed for premature closure.
Interest rates in case of premature closure of RD in the post office will be less, as per the savings account. Additionally, you may be charged penalties for advanced closure.
Even one-day prior closure of the RD account from the date of maturity will be considered premature closure, and savings account interest rates will be applicable.
If you paid any advanced deposits for your RD account, then you cannot close your account for the tenure for which advanced payment is made.
The interest rates offered by Post offices are mentioned below -
Account | Interest Rates |
---|---|
Recurring Deposit Account |
6.70% p.a. (compounded quarterly) |
Saving Account |
4.00% p.a. |
In case you opt for premature withdrawal against premature closure, then you are required to pay the withdrawal amount in your account before the maturity of your RD account to avoid lower interest rate payments.
To close your RD account by traditional means before its maturity, you need to follow the steps mentioned below -
Step 1: Visit the post office where you have your RD account. Carry your RD account passbook.
Step 2: Fill out the application for ‘premature closure of account’ (FORM -2).
Step 3: Submit the application and the passbook to the staff.
Step 4: Staff will process the request and share your acknowledgment receipt.
Your amount will be refunded to your savings account within a few days.
You can close your RD account before its maturity with the ease of online application on the official India Post site. To use online RD premature closure services, you need to activate your post office savings account net banking -
Step 1: Visit India Post's official website.
Step 2: Log into your account with your Net-banking ID and password.
Step 3: Enter the OTP you receive in your registered mobile number.
Step 4: Visit ‘General Services’ in the navigation bar.
Step 5: Click on ‘Service Requests’.
Step 6: Then go to ‘New Requests’.
Step 7: Click on ‘Closure/pre-closure of RD accounts’.
Step 8: Choose the type of RD account i.e. Post Office TD or Post Office RD account and press ‘Go’.
Step 9: Enter your RD account number, select your credit account, and press ‘Submit Online’.
Step 10: Enter your transaction password, and submit again.
Step 11: Collect the Acknowledgment / Reference number.
The amount will be transferred to your linked savings account within 24 hours.
Let’s try to understand this better with an example.
Mrs. Suhani opened a post office RD account for a better financial future. She has timely deposited Rs.1,000 in her RD account monthly for 3 years (36 months) at 6.50% per annum; which is compounded quarterly.
After 3 years, she suddenly requires funds to meet her medical expenses. She has no other choice and chooses premature closure of her RD account. She can do it via offline or online mode following the steps mentioned above.
Since 2 years are still pending out of 5 years, Mrs. Suhani will be paid interest as per normal savings account which is 5.80% p.a. According to the post office RD premature closure calculator; she will be paid a total sum of Rs.42,588 for 3 years at 5.80% p.a.
In the same situation, if a premature withdrawal was done, and the amount was paid on time, then the amount at 6.50% p.a. for 3 years would be Rs.43,380. If premature RD closure was not done, then Mrs. Suhani would have received Rs.792 more for the same tenure of 3 years.
RD accounts at the post office are a great choice for many investors who want to secure their future. Post Office RD accounts allow for partial and premature withdrawals and ensure higher interest rates than saving accounts.
Premature RD closure can meet immediate financial needs, and it is easy to apply for it, both offline and online. You should consider that normal saving account interest rates are applicable with premature RD closure, instead of RD interest rates. Thus RD premature closure should be the last choice for a fund seeker.
Yes, you can close your RD account before its maturity, but a minimum of 3 years should have passed. The Post Office will pay you interest as per its savings account interest rate upon premature closure.
If you choose premature closure, then the Post Office may charge you a penalty of up to 1.00% on the amount, based upon the time remaining till maturity.
There are different tenures in both offline and online modes. For online applications, it takes around 24 hours while for offline mode, it takes a few days. The timeline also differs for all branches.
You can withdraw up to 50% of the amount deposited in your account removing the interest amount. The premature withdrawal can be done after 3 years of active RD account.
Deductions are subject to the terms and conditions of the RD scheme by the post office. It depends further on interest rates, penalties levied if any loan is taken before, delayed payments for RD, and more.
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