Post Office Time Deposit: Interest Rates, Repayment to Premature Withdrawal – 5 things to know

Bulbul Dhawan
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Post Office Time Deposit scheme: India Post provides several small savings schemes to people, including facilities like savings accounts and recurring deposits. Moreover, just like normal banks, the post office also provides the facility of opening time deposit, or fixed deposit, account. Time deposits are those which cannot be withdrawn before a prefixed date or needs notice for premature withdrawal. A Time Deposit account at Post Office can be opened by individuals of sound mind and above 18 years, minors who have attained the age of 10 years, guardian of a minor or a person of unsound mind and superintendent of a mental hospital where a person of unsound mind is admitted. Apart from these, there is also a provision for a maximum of three adults to open a joint time deposit account. There are four categories of time deposit accounts: 1-year, 2-year, 3-year and 5-year deposits.

Here are 5 things you should know about the time deposit accounts in the post office:

Forms required

The main forms used for this scheme are:

  • Account Opening Form (AOF): To apply for a time deposit account, the common Account Opening Form is used. While opening a time deposit account, a funding transaction is mandatory.
  • Time Deposit Journal: The RD Journal has to be used for time deposit accounts at the extra-departmental branch offices.
  • Consolidated Journal of Deposits and Withdrawals, which is generated by from the Finacle Core Banking Solutions (CBS) system.
  • CBS Pass Book: A common passbook will be used for which form SB-5A, common for NSC, KVP and TD, will have to be filled. According to the India Post guidelines, the passbook entries should be made using a passbook printer. However, in case of the passbook printer not working, the entries may be made by hand by mentioning the amount of deposit and repayment in the account. These amounts should be written in words as well as figures.
  • Pay-in-slip: For deposits into these accounts, form SB 103 will be used.
  • Application for payment of interest in time deposit accounts: Form SB-7 will have to be used for the payment of interest.
  • Account Closure Form: SB-7A will be used to close the time deposit account.

Repayment of deposits and payment of annual interest

The deposit in the account will be repaid at the end of the deposit period. Meanwhile, the interest will be paid annually. In the calculation of the interest payable, the amount will be rounded off to the nearest one rupee. According to the India Post guidelines, if the date of payment of annual interest falls on a Sunday or on the day of a postal holiday, the amount will be paid on the business day preceding the actual date of payment.

Interest rates of post office time deposit

With effect from July 1, 2019, the following interest rates have been prevailing on time deposits in the post office.

  • 1-year time deposit account: 6.9%
  • 2-year time deposit account: 6.9%
  • 3-year time deposit account: 6.9%
  • 5-year time deposit account: 7.7%

Premature closure of time deposit account

An account holder will be allowed to prematurely withdraw the time deposit account after six months of opening the account. If the account holder closes the account between six months to one year, the interest is paid on the rate prescribed for the savings account.

In case of premature withdrawal of 2-year, 3-year and 5-year accounts after the first year has been completed, the interest will be paid on the deposit for the completed years and months. However, this rate of interest will be 1 per cent less than the specified rate of interest for the deposit account.

In case of a 5-year deposit, if three years have been completed before the withdrawal request, the interest will be paid for the completed years and months at an interest rate 1 per cent less than the specified rate for 3-year deposit.

If the interest amount already paid before closure exceeds the amount of interest due according to forementioned conditions, the exceeded amount will be adjusted against the principal deposit and the payable interest rate and the remaining amount will be returned to the owner.

Time deposit as security

A time deposit account holder can transfer the time deposit account as security. However, the owner will have to pledge the entire amount in the time deposit account as pledging of partial balance is not permitted. The owner can apply for the transfer of account using form SB-13(a). The pledged account can be retransferred to the original owner after getting the written authority from the person to whom the account had been pledged.