Make Rs 3.6 lakh for just Rs 5000/month with Post Office: Check calculation formula

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October 28, 2019 1:33 PM

Post Office Recurring Deposit Calculation formula: Know the maturity value for Rs 2,000, Rs 5000 monthly deposits

Post Office Recurring Deposit Calculation formula: If you are looking to save each month in a fixed deposit on a recurring basis, the recurring deposit (RD) can be the right investment option that has a fixed rate of interest. An RD is like an account into which one needs to invest the same amount each month for a fixed period. In banks, one can open RD account for any period, however, in a post office, an RD can be opened for a fixed period of 5 years only. Currently, the interest rate on the post office recurring deposit (PO RD) is higher than what most banks offer on their 5-year bank RD scheme. In SBI and HDFC Bank, the recurring deposit rate of interest are 6.25 per cent and 6.75 per cent respectively.

For the quarter ending December 2019, the interest rate on PO RD account is 7.2 per cent per annum. One can open a PO RD account with a minimum of Rs 10 and thereafter can invest in multiples of Rs 5. As per the IndiaPost website, if one opens an account and keeps depositing Rs 10 each month till 60 months, the maturity value will become Rs 725.05.

Post Office RD Calculation Formula

So, if you want to calculate maturity value of PO RD, you can use the Post Office RD interest calculation formula below:

Divide the monthly amount that you wish to invest with 10 and then multiply the result by 725.05

For example, if you wish to invest Rs 750 per month, then 750 /10 = 75 and then 75*725.05 = 54378.75, which is the maturity value.

Similarly, if you wish to invest Rs 5000 in PO RD, then 5000/10 = 500 and then 500*725.05 = 362525

By using the above formula, you may not even require the PO recurring deposit maturity amount calculator. The formula will, however, work only when the interest rate is 7.2 per cent quarterly compounding.

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Post Office Recurring Deposit Scheme

The compounding of interest in PORD is on a quarterly basis which means the effective yield becomes higher. Lower the frequency of compounding, higher is the effective yield. So, a quarterly compounding is better than half-yearly or annual compounding.

Once the PO RD account is opened, the rate of interest remains fixed until 5 years. Government resets interest rate on small savings investments every quarter of the financial year, however, that will apply on fresh RD account opened.

One is allowed to open any number of RD accounts in any post office and the account can also be opened in the name of a minor while a minor of 10 years and above age can open and operate the account by oneself.

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