The recurring deposit (RD) in post offices is popular with the masses of India who find it convenient to deposit a fixed sum of investible surplus in the RD account every month with the expectation that the post office will securely multiply it and return at the end of 5 or 10 years, which is the longest window of investment in this guaranteed-return instrument.
However, post office rules state that one of the facilities that if a person has an RD account, he/she can take loans against it. The terms and conditions that govern these loans are also quite simple and easy to follow.
Loan against Post Office RD
India Post states any investor who has put money into an RD account for 12 instalments and the account is at least deposited and account is at least 1-year-old can apply for a loan. The advantage of taking such a loan is that the account holder can continue his/her account and doesn’t have to surrender the gains he/she has made in the past several months or years.
The loan raised against the RD can be paid off in different ways. The debtor may pay it off in a single lump sum or liquidate it in monthly instalments.
Maximum amount of loan
The maximum amount of loan that one can take against the RD is 50% of the balance in the account. The interest payable will be 2% over and above the interest paid by the RD to the account holder.
Another point to note is that the interest to be repaid will be calculated from the date of withdrawal of the money to the date of repayment.
If loanee fails to repay
If the RD accountholder fails to repay the loan, the post office will realise the entire amount – principal and interest – from the accountholder by deducting it from the maturity amount.
However, one cannot apply for and obtain such loans online. The account holder has to visit the concerned post office where the account was opened with the passbook. He/she has to fill up the relevant form and submit it.
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