Post Office Recurring Deposit (5-Year RD) Default Rules Explained
The National Savings Recurring Deposit Scheme, 2019, operated through the Department of Posts (India Post), is one of the most widely utilized sovereign savings instruments for middle-income and rural households. The scheme requires fixed monthly deposits over a tenure of 5 years (60 continuous months). Because monthly discipline is central to recurring deposits, India Post enforces explicit statutory rules governing due dates, default charges, and the consequences of consecutive missed deposits.
Instalment Due Dates and Default Formula
Under Rule 6 of the Scheme, the deposit due date is governed strictly by the day of the calendar month on which the account was initially opened:
- Opened on or before the 15th of a month: Subsequent instalments must be deposited on or before the 15th day of each calendar month.
- Opened on or after the 16th of a month: Subsequent instalments must be deposited on or before the last working day of each calendar month.
If an instalment is not deposited within the prescribed window, a statutory default fee is levied under Rule 7 at the rate of ₹1 for every ₹100 of the monthly deposit for each defaulted month. For example, on a ₹2,000 monthly instalment, the default charge is ₹20 per month of default.
Cumulative Default Fee Calculation Table
When multiple consecutive months are missed, default charges accumulate progressively based on the number of months each instalment has remained overdue:
| Missed Month Number | Months Overdue when Regularizing | Default Fee (per ₹1,000 Deposit) | Default Fee (per ₹5,000 Deposit) |
|---|---|---|---|
| Month 1 (First Default) | 3 Months Overdue | 3 × ₹10 = ₹30 | ₹150 |
| Month 2 (Second Default) | 2 Months Overdue | 2 × ₹10 = ₹20 | ₹100 |
| Month 3 (Third Default) | 1 Month Overdue | 1 × ₹10 = ₹10 | ₹50 |
| Total for 3 Months Default | Cumulative Arrears | ₹60 Default Fee | ₹300 Default Fee |
The 4-Default Rule vs Discontinuation
A Post Office RD account permits up to four consecutive defaults without losing its active status. The depositor can regularize the account at any time within this period by depositing all defaulted instalments together with the cumulative default fee. Furthermore, the overall maturity date of the account is extended by the exact number of months defaulted, ensuring that the depositor completes all 60 instalments to claim the full compounding maturity value.
However, if defaults occur in five consecutive months, the account becomes statutorily discontinued under Rule 7(3). When an account is discontinued:
- The depositor has a grace period of two months from the date of the fifth default to apply for revival of the account.
- Revival requires the postmaster's approval, payment of all overdue instalments, and settlement of all accumulated default fees.
- If not revived within the two-month window, the account is permanently barred from accepting further deposits. The depositor can either take premature closure (if 3 years completed) or receive simple Post Office Savings Account interest on maturity.
Representative Worked Example
Consider Smt. Anita, who runs a monthly ₹5,000 Post Office RD. Due to family expenses, she missed 3 consecutive instalments (January, February, March) and visits the post office in April to regularize:
- Overdue Principal Instalments: 3 months × ₹5,000 = ₹15,000.
- Default Fee on January Deposit: 3 months overdue × ₹50 = ₹150.
- Default Fee on February Deposit: 2 months overdue × ₹50 = ₹100.
- Default Fee on March Deposit: 1 month overdue × ₹50 = ₹50.
- Total Default Fees: ₹150 + ₹100 + ₹50 = ₹300.
- Total Cash Required at Counter: ₹15,000 (arrears) + ₹300 (fee) + ₹5,000 (current April deposit) = ₹20,300.
- Account Status: Fully regularized with zero adverse effect on full 6.7% compounded maturity returns.
Frequently Asked Questions (FAQs)
1. Can I deposit advance instalments in Post Office RD to get a rebate?
Yes. Rule 8 permits advance deposits. If at least 6 consecutive instalments are deposited in advance, a statutory rebate is granted (₹10 rebate for 6 months on ₹100 denomination, and ₹40 for 12 months advance deposit).
2. Can a discontinued Post Office RD account be prematurely closed?
Yes, provided the account has been maintained for at least three continuous years from the date of opening. Upon premature closure, interest is calculated strictly at the Post Office Savings Account rate (4.0% p.a.).
3. Can I regularize an RD through India Post Payments Bank (IPPB) mobile banking?
Yes. The IPPB mobile banking app automatically computes the statutory default fee for overdue instalments and debits the total regularizing sum directly from your linked IPPB account.