Small savings schemes: Five-year recurring deposit will make more money for you in December quarter; this is the new interest rate

Small savings scheme interest rates: The government on Friday announced a hike of 20 basis points in the interest rate offered under the five-year recurring deposit small savings scheme. The interest rate will be applicable for the quarter ending December 31, 2023. 

The new interest rate, which will take effect on October 1, will be 6.7 per cent, instead of the current 6.5 per cent, according to an official statement. 

However, the interest rates applicable to other small savings schemes, including the Monthly Income Account Scheme, the Public Provident Fund Scheme, and the Kisan Vikas Patra savings certificates, were left unchanged. 

Here are the interest rates applicable to all small savings schemes, according to the finance ministry:

Here are 10 things to know about the five-year recurring deposit small savings scheme: 

Five-year recurring deposit scheme: Minimum investment

A five-year RD account can be set up with a minimum investment of Rs 100 per month, according to the India Post website, indiapost.gov.in.  

Five-year recurring deposit scheme: Maximum investment

Any amount in multiples of Rs 10 starting at Rs 100 per month can be invested in the RD scheme. 

Where to set up a five-year recurring deposit account?

Just like all small savings schemes, the five-year RD account is available at select banks and designated post office branches.  

Who can invest in the five-year recurring deposit account scheme?

The account can be held singly or jointly by up to three adults, by a guardian on behalf of a minor, or by a minor above 10 years of age. 

Can you hold multiple accounts under the five-year recurring deposit scheme

There is no limit to the number of accounts an individual or a group of individuals can hold under this small savings scheme. 

Five-year recurring deposit account: Contribution frequency

Once the account is set up, subsequent deposits are made on the 15th day or the last working day of a month, if opened in the first and second fortnight of the month, respectively.

Is there an advance deposit facility available under the five-year recurring deposit scheme?

One can make advanced deposits in the account up to five years in advance at the time of opening or at any time subsequently. Depositors making at least six advance payments are eligible for a rebate of Rs 10 on a recurring deposit of Rs 100 per month for six months and Rs 40 for 12 months. 

What happens if you miss a payment under the five-year recurring deposit scheme?

In case of a default, a penalty of one per cent of the RD amount is applicable. The account is discontinued after four back-to-back defaults. 

Loan facility

After completing 12 installments, the deposit is eligible for a loan facility up to 50 per cent of the balance credit in the account. This loan can be repaid in a lump sum or in equal monthly installments. An interest rate of 200 basis points on top of the interest rate of the RD account is applicable to such loans. 

Premature closure of the five-year recurring deposit account

A five-year recurring deposit small savings scheme account can be closed prematurely after the first three years from the date of opening.