If you are running a 5-year RD in the post office and are unable to pay the installment, then after how many defaults is the account closed? What are the terms and conditions associated with it. Can it be restarted? Know everything here.

Whenever it comes to investment schemes with safe and guaranteed returns, the name of the post office comes first. Among the many schemes of the post office, 5-year recurring deposit (Recurring Deposit - RD) has been a very popular and reliable option of savings for common Indian families. In this, you can add a good amount in 5 years by depositing a small and fixed amount every month. Currently, the post office RD is getting interest at the rate of 6.7% per annum, which is better than many bank FDs.

But the basic principle of RD is discipline, that is, you have to deposit the installment on time every month. There are many occasions in life when we are unable to pay the installment on time due to financial constraints or some other reason. In such a situation, the question arises in the mind that what will happen if 2-3 installments of RD are missed? Will the account be closed or will the work be done by just paying the penalty? Let's understand all the rules related to Post Office RD.

Know when the account is closed

If you are unable to deposit your RD installment by the due date in any month, then your account is not closed immediately. The post office gives you the facility to deposit it with a penalty. A penalty of Rs 1 per month is charged on every Rs 100. This means that you will have to pay a penalty at the rate of 1% per month on the amount of your installment. But if there are more than four defaults, then the account will be considered closed (discontinued).

Example: Suppose your monthly installment of RD is Rs 2,000 and you deposit one month's installment late, then you will have to pay a penalty of 1% i.e. Rs 20 on Rs 2,000. You will have to deposit a total of Rs 2,020. This rule applies for every month until you deposit your outstanding installment.

After how many consecutive installments is the RD account closed?

According to the rules of the post office, if an investor does not deposit his RD installment for four consecutive months, then his account is 'discontinued' i.e. closed. This means that you will not be able to deposit any more money in it and the account will become inactive.

Time to revive

If your account is closed due to not paying four installments, then there is no need to panic. The post office gives you a chance to start it again. But permission to revive it will be given only within a period of two months from the fourth default month. For this, you will have to go to your post office and submit an application. You will have to deposit all your outstanding installments and the penalty imposed on them together. By doing this, your account will be activated again and you can continue it as before. But if you do not activate the account even within this two-month deadline, then it is permanently closed and you will not be able to make any further investment in it.

How to save RD from closing in financial crisis?

If you feel that your financial condition is not good and you will not be able to pay installments for a few months, then you can take the path of rescue even before defaulting 4 installments. You can anticipate the situation and apply in the post office and extend the maturity period of your RD account for as many months as you are not able to pay the installment. This option will save you from closing the account.