Difference Between Post Office RD vs Bank RD

Recurring Deposits (RDs) are a simple and safe way to save money regularly. They’re great for people who don’t want to take risks with their savings. You just deposit a fixed amount every month for a set period and earn interest on it. 

Read on to understand it in detail and know how Post Office RDs differ from Bank RDs.

What is a Post Office RD?

A Post Office Recurring Deposit (RD) is a government-backed savings option offered under the Post Office Savings Scheme. It’s a safe and reliable way to save money over a medium-term period. Since post offices are spread across the country, even in small towns and villages, this RD is especially popular among people living in rural areas.

Key Features of Post Office RD:

Here are the key features of the Post Office RD scheme that make it a reliable and accessible savings option for all:

• Fixed Investment Tenure: All RD in post office accounts have a fixed term of 5 years that cannot be altered.
• Minimum Investment: You can start investing as little as ₹100 per month and the amounts increase in multiples of ₹10. This makes it ideal for individuals just starting to save money.
• Joint and Minor Accounts: This account can be opened by 2 adults jointly and a minor can also open an account with the guidance of an adult.
• Partial Withdrawal: After 1 year, account holders can withdraw up to half of the amount. This ensures that there is some cash flow without affecting the overall investment.
• Rate of Interest: The Ministry of Finance changes the interest rate of RD in post office every three months. It is now at about 6.7% per year, according to the most recent report.

What is RD in Bank?

Among popular saving methods, RD is widely preferred. Customers set aside a fixed amount of money each month for a specified period, and the value grows with interest. Unlike Post Office RDs, Bank RDs let you choose the length of the loan and offer online services.

Key Features of Bank RD:

Here are the standout features of Bank Recurring Deposits (RDs) that make them a flexible and convenient savings tool for diverse financial needs:

• Customisable Tenure: You can choose from terms as short as 6 months and as long as 10 years for bank RDs, so they can help you reach both short- and long-term goals.
• Flexible Deposit Amounts: You can start with as little as ₹500, depending on the bank. Some banks let you use as little as ₹100 to ₹250.
• Loan Facility: Many banks offer loans or overdrafts of up to 90–95% of the RD value. This can help you access cash more quickly in an emergency.
• Digital Banking Access: Banks offer easy digital management. Open an RD in a Bank account and manage it through net banking or mobile apps.
• Attractive Returns: Interest rates are typically comparable to those of fixed deposits and slightly higher than those on savings accounts.

Tenure and Deposit Flexibility

When it comes to investment flexibility, the choice between Post Office RD and Bank RD depends largely on your financial goals and preferred tenure:

• Post Office RD: Has a fixed term of 5 years. Depositors must always make payments every month. The set term makes saving more disciplined, but investors with shorter or longer-term goals can’t change it.
• RD in Bank: Terms range from 6 months to 10 years, providing you with numerous options. This makes a Bank RD a better option for people with different savings goals. Whether you’re saving for a gadget in 6 months or planning to build wealth over 10 years, it offers flexibility.

Security and Returns

When it comes to safety and reliability, both Post Office and Bank RDs offer secure options, but with different levels of backing and risk coverage:

• Post Office RD: This lets you send money back safely and securely. The Indian Government backs this service. The Ministry of Finance updates the returns every three months to ensure their accuracy and completeness.
• Bank RD: Interest rates vary depending on the bank and the duration of the deposit. Bank safety depends on the financial health of the institution. However, most scheduled banks are covered by DICGC insurance, which protects up to ₹5 lakh in savings, making them relatively secure.

Comparison Between Post Office RD vs Bank RD

Here’s a quick comparison table highlighting the key differences between Post Office RD and Bank RD to help you make an informed decision: 

Feature	Post Office RD	Bank RD
Tenure	Fixed 5 years	6 months to 10 years
Deposit Amount	₹100 onwards	₹500 onwards (varies)
Interest Rate	Revised quarterly	Varies, often fixed for tenure
Liquidity	50% withdrawal after 1 year	Loans/OD up to 95%
Renewability	Not allowed	Usually allowed
Online Access	Limited	Fully digital
Tax on Interest	Yes	Yes (with TDS if applicable)
Account Type	Joint & minor allowed	Joint & minor allowed

Choose the Right RD Option for Your Financial Goals

The RD in the Post Office and the RD in the Bank are great ways to save money regularly and without risk. As a government-backed account, the recurring deposit account in post office is ideal for individuals who prefer to save money in a traditional, secure manner. 

No matter what you choose, an RD or an FD, make sure it fits your savings plan. With the Fibe app, you can start saving smartly. Book an FD instantly starting from just ₹1,000. Enjoy flexible tenures and earn attractive interest rates all in a few taps.

FAQs

Is RD better in bank or post office?

If protection is important to you, Post Office RDs are the ideal choice. Bank RDs, on the other hand, give you more freedom and digital ease.

Is it better to invest in a post office or a bank?

The post office is great if you want set returns and safety. Banks are better if you want flexible terms and online access.

Is 5 year RD in post office taxable?

Your income tax bracket will determine whether the interest you earn on a 5-year RD at the post office is taxable.