The Post Office Recurring Deposit (RD) has maintained an interest rate of 6.7% since October 1, 2023. This rate is important for monthly savers who want a reliable and fairly priced saving option. The government reviews this rate every quarter, and if the rate remains unchanged after the September 30, 2026 notification, it will be the 13th consecutive quarter at 6.7%. This article explains what you should know about this scheme before the upcoming review.
- The RD interest rate is linked to the 5-year government securities (G-sec) rate.
- The current RD rate of 6.7% is slightly below the implied rate of 6.75% based on the G-sec benchmark.
- The scheme requires monthly deposits of ₹100 or more for five years, with interest compounded quarterly.
- There is no tax benefit under this scheme, but premature closure and loans are allowed under certain conditions.
- The RD rate remains competitive compared to bank recurring deposits, many of which offer lower rates.
What is the Post Office Recurring Deposit scheme?
The Post Office Recurring Deposit scheme allows individuals to save money by depositing a fixed amount every month for a period of 60 months (five years). The minimum monthly deposit is ₹100. Interest is compounded quarterly, which helps your savings grow faster than simple interest schemes. This scheme is popular among small savers who want a disciplined way to save regularly.
How is the interest rate determined?
The interest rate for the Post Office RD is set according to a government framework recommended by the Shyamala Gopinath Committee. The rate is linked to the average yield of 5-year government securities (G-sec) during the previous quarter. For example, in the July-September 2026 quarter, the 5-year G-sec averaged about 6.5%. The RD rate usually includes a 25 basis points (0.25%) spread over this benchmark, which suggests an implied rate of around 6.75%. Currently, the RD rate is 6.7%, slightly below this implied rate, indicating it is fairly priced.
Are there any tax benefits or penalties?
The Post Office RD does not offer any tax benefits under income tax laws. However, the scheme allows premature closure of the account after it has run for at least three years. Additionally, account holders can take a loan of up to half the balance after making 12 monthly installments. These features provide some flexibility for savers who might need funds before maturity.
How does the Post Office RD compare to bank recurring deposits?
Bank deposit rates have generally declined during 2025-26 due to multiple rate cuts by the Reserve Bank of India. Many banks now offer recurring deposit rates below 6.7%. This makes the Post Office RD one of the better options available for recurring deposits in the current market. Its government backing and stable rate add to its appeal for conservative savers.
What happens after the maturity of an RD account?
The interest rate applicable to an RD account is fixed at the time of opening and remains valid for the entire five-year term. Even if the government revises rates in the future, the original rate continues to apply for that account. Upon maturity, if the account is extended, the rate at which it was originally opened will still apply. This ensures that savers know exactly what returns to expect from their investment.
