Compare Post Office RD and Bank RD on interest rates, safety, flexibility, and features. Learn which option is better for your savings goals.
Should you open an RD at the post office or a bank? Both offer recurring deposit schemes, but they differ in interest rates, safety, and features.
Here's a comprehensive comparison to help you decide.
Quick Comparison
| Feature |
Post Office RD |
Bank RD |
| Interest rate |
6.7% |
5.5-7.5% |
| Compounding |
Quarterly |
Monthly/Quarterly |
| Tenure |
5 years (fixed) |
6 months - 10 years |
| Minimum deposit |
₹100 |
₹100-500 |
| Maximum deposit |
No limit |
No limit |
| Premature closure |
After 3 years |
Usually after 6 months |
| Safety |
Government guarantee |
DICGC (₹5 L) |
Calculate your RD returns: Use our RD Calculator.
Interest Rate Comparison
Current Rates (2024)
| Institution |
RD Rate |
Compounding |
| Post Office |
6.7% |
Quarterly |
| SBI |
6.5% |
Quarterly |
| HDFC Bank |
7.0% |
Quarterly |
| ICICI Bank |
7.0% |
Quarterly |
| Axis Bank |
7.0% |
Quarterly |
| Kotak |
7.1% |
Quarterly |
| Yes Bank |
7.5% |
Quarterly |
| AU SFB |
8.0% |
Quarterly |
Rate Comparison for ₹5,000/Month (5 Years)
| Institution |
Rate |
Maturity Value |
| Post Office |
6.7% |
₹3,59,455 |
| SBI |
6.5% |
₹3,56,775 |
| HDFC Bank |
7.0% |
₹3,64,420 |
| AU Small Finance |
8.0% |
₹3,77,250 |
Private banks and SFBs often offer higher rates than post office.
Safety Comparison
Post Office RD
| Safety Factor |
Details |
| Guarantee |
Government of India |
| Insurance |
Not needed (sovereign) |
| Bank failure risk |
None |
| Deposit limit |
Unlimited guaranteed |
Bank RD
| Safety Factor |
Details |
| Guarantee |
Bank's financial health |
| Insurance |
DICGC covers ₹5 lakh |
| Bank failure risk |
Exists (rare for large banks) |
| Beyond ₹5 L |
Uninsured |
Safety Verdict
| Amount |
Safer Option |
| Any amount |
Post Office (sovereign guarantee) |
| Up to ₹5 L |
Bank equally safe (DICGC) |
| Above ₹5 L |
Post Office safer |
Post Office is technically safer for large amounts, but major banks have never failed retail depositors in modern India.
Tenure and Flexibility
Post Office RD
| Feature |
Rule |
| Tenure options |
5 years only |
| Extension |
Can extend in 5-year blocks |
| Premature closure |
After 3 years only |
| Penalty |
Lower interest rate applied |
Bank RD
| Feature |
Rule |
| Tenure options |
6 months to 10 years |
| Flexibility |
Choose any tenure |
| Premature closure |
Usually after 6 months |
| Penalty |
0.5-1% interest reduction |
Flexibility Verdict
| Need |
Better Option |
| Fixed 5-year goal |
Either |
| Shorter tenure needed |
Bank RD |
| Might need early closure |
Bank RD |
| Longer than 5 years |
Bank RD |
Bank RD offers more flexibility in tenure options.
Features Comparison
Deposit Amount
| Feature |
Post Office |
Bank |
| Minimum monthly |
₹100 |
₹100-500 |
| Maximum monthly |
No limit |
No limit |
| Increment |
Multiples of ₹10 |
Varies by bank |
Missed Payment Rules
| Scenario |
Post Office |
Bank |
| Default |
₹1 per ₹100 per month |
Varies (₹1-2 per ₹100) |
| Grace period |
Up to 4 defaults |
Usually 1-2 months |
| Account closure |
After 4 consecutive defaults |
After 3-4 months |
Loan Facility
| Feature |
Post Office |
Bank |
| Loan available |
Yes, after 1 year |
Yes, after 6-12 months |
| Loan amount |
Up to 50% of balance |
Up to 90% of balance |
| Interest rate |
RD rate + 2% |
RD rate + 1-2% |
Tax Treatment
Same for Both
| Aspect |
Treatment |
| Interest taxation |
At slab rate |
| TDS threshold |
₹40,000/year (₹50,000 seniors) |
| 80C benefit |
Not available |
| Form 15G/15H |
Applicable if eligible |
Tax treatment is identical - no advantage either way.
Convenience Comparison
Post Office
| Advantage |
Disadvantage |
| Widespread network |
Manual processes |
| No minimum balance needed |
Slow service sometimes |
| Trusted by older generation |
Limited digital options |
Bank
| Advantage |
Disadvantage |
| Digital setup and management |
May require account |
| Auto-debit facility |
Minimum balance rules |
| Online tracking |
Branch network varies |
| App-based monitoring |
|
Convenience Verdict
| Preference |
Better Option |
| Digital savvy |
Bank |
| Rural areas |
Post Office (better reach) |
| Easy tracking |
Bank (app-based) |
| No bank account |
Post Office |
Opening Process
Post Office RD
| Step |
Action |
| 1 |
Visit post office with KYC documents |
| 2 |
Fill account opening form |
| 3 |
Submit with first deposit |
| 4 |
Get passbook |
| 5 |
Monthly deposits at counter/standing instruction |
Bank RD
| Step |
Action |
| 1 |
Log in to net banking/app |
| 2 |
Go to Deposits → RD |
| 3 |
Select amount, tenure |
| 4 |
Set up auto-debit |
| 5 |
Done (5 minutes) |
Bank RD is much easier to open for existing account holders.
Who Should Choose What
Choose Post Office RD If
| Criteria |
Check |
| Deposit > ₹5 L (want full safety) |
✓ |
| No bank account |
✓ |
| Rural area (limited bank access) |
✓ |
| Fixed 5-year goal |
✓ |
| Prefer government institution |
✓ |
Choose Bank RD If
| Criteria |
Check |
| Want higher interest rate |
✓ |
| Need tenure flexibility |
✓ |
| Prefer digital management |
✓ |
| Might need premature closure |
✓ |
| Want auto-debit convenience |
✓ |
Special Considerations
For Senior Citizens
| Factor |
Post Office |
Bank |
| Extra interest |
No |
Yes (0.25-0.5%) |
| SCSS available |
Yes (better option) |
No |
| 80TTB benefit |
Yes |
Yes |
Senior citizens may prefer bank RD for extra interest, or SCSS for higher returns.
For Minors
| Factor |
Post Office |
Bank |
| Minor account |
Yes (with guardian) |
Yes (with guardian) |
| Process |
Manual |
Usually easy |
Both allow minor accounts with parent/guardian as operator.
For Tax Savers
| Neither Post Office RD nor Bank RD offers 80C benefit. |
| Consider: PPF, Tax-saving FD, ELSS instead. |
Maturity Comparison Example
₹10,000/Month for 5 Years
| Institution |
Rate |
Invested |
Maturity |
Interest |
| Post Office |
6.7% |
₹6,00,000 |
₹7,18,910 |
₹1,18,910 |
| SBI |
6.5% |
₹6,00,000 |
₹7,13,550 |
₹1,13,550 |
| HDFC Bank |
7.0% |
₹6,00,000 |
₹7,28,840 |
₹1,28,840 |
| AU SFB |
8.0% |
₹6,00,000 |
₹7,54,500 |
₹1,54,500 |
AU SFB RD earns ₹35,590 more than post office over 5 years.
Conclusion
| Factor |
Winner |
| Interest rate |
Bank (private/SFB) |
| Safety (unlimited) |
Post Office |
| Safety (up to ₹5 L) |
Tie |
| Flexibility |
Bank |
| Convenience |
Bank |
| Rural accessibility |
Post Office |
| Digital experience |
Bank |
Recommendations:
| Your Situation |
Choose |
| Amount < ₹5 L, want best rate |
Private bank or SFB |
| Amount > ₹5 L, safety priority |
Post Office |
| Need short tenure (< 5 years) |
Bank |
| Rural area, limited options |
Post Office |
| Digital savvy, want convenience |
Bank |
| Senior citizen |
Bank (higher rate) or SCSS |
For most urban investors with deposits under ₹5 L, bank RDs offer better rates and convenience. Post Office RD remains relevant for those prioritizing absolute safety or living in areas with limited bank access.
Compare RD options: Use our RD Calculator to see maturity values at different interest rates.
