How to Close a Recurring Deposit (RD) Account: Rules, Penalties & Process Explained

A Recurring Deposit or RD is a saving scheme by banks, post offices, etc., to build a regular saving habit and earn interest. By depositing a fixed amount periodically into an RD account, you can steadily build a savings corpus over time.

However, in case of financial emergencies, you may need to close RD account prematurely. Additionally, you might be wondering about the process of closing an RD account after its tenure ends.

Read this article to learn how to close your Recurring Deposit account, applicable conditions and more. 

Conditions by Banks Regarding Premature RD Amounts Withdrawals 

Prior to opting for a premature RD closure, you should know the rules imposed by banks:

• If you are opting for a partial withdrawal of your invested RD amount, you must learn about the bank’s partial withdrawal policy.
• For premature withdrawals, most financial institutions or banks impose a penalty. However, the penalty amount might differ from bank to bank.
• On average, these penalties range between 0.5% and 1% and depend on the remaining period to RD maturity.
• Premature withdrawal from your RD account impacts your interest earnings. In such cases, the bank or financial institution will offer a lower interest rate than the initially agreed-upon rate.
• You can withdraw a maximum of 50% of the amount you invested till the date of RD closure.
• When you close RD account prematurely, you need to repay the amount by equal payments or a lump sum before the maturity.
• In case you fail to repay your withdrawn RD amount, the bank will debit the amount plus interest from your maturity amount.

Rules Regarding Premature Withdrawal of RD From Post Office

If you have an RD account with your local post office, you should know the rules to close post office RD account:

• You can request to close RD account or to withdraw the RD amount prematurely only after 3 years of RD creation with a post office.
• When closing an RD account with a post office, even one day prior to maturity, the interest rate will drop.
• If you have made an advance RD payment, you cannot close the account until the deposited period ends.

Important Points to Consider Before Closing Your RD Account

Closing your RD account prematurely should be your last resort. Before you close RD, consider the following:

• Impact on Investment: An RD is a safe investment and similar to FDs and offers a higher interest than a savings account. Premature closure can significantly reduce your interest earnings.
• Costs: When closing an RD account, you need to pay penalty charges. The charges vary depending on the bank.
• Get a Loan: Instead of closing your RD, consider taking a loan against it. Many banks offer this facility, allowing you to access funds while keeping your RD investment intact.

When Should You Approach to Close RD?

Here are a few exemplary situations when you should go for a premature RD withdrawal:

• Urgent Funds: If you run into any emergencies and need substantial funds, you can go for an RD withdrawal.
• Other Investment Opportunities: If you find better investment methods with higher payouts, you can prematurely withdraw RD for that investment.
• Meet Financial Goals Early: If you want to expedite your financial objectives like buying a house, you can close RD if there is no option left.

Steps to Follow to Close RD Accounts 

Following these steps to seamlessly close your RD account:

Step 1: You need to visit the nearest bank branch with which you have an RD account. Also, you can contact their customer support. 

Step 2: For verification purposes, your bank will require some key documents such as ID proofs, PAN card, Aadhaar Card, passbook, etc.

Step 3: Get the form for RD closure from your bank and duly fill it out with information like name, signature, account number, closure reason, etc.

Step 4: Before withdrawing your RD amount, ensure that any outstanding penalties or dues are cleared. This is especially important if you have taken a loan against your RD.

Step 5: Return your RD passbook to your bank. Also, ensure to collect any important items or documents you kept as securities.

Step 6: When you complete the required procedures to close RD, your bank will close your account. 

Steps to Withdraw RD Amounts From Post Office Online

Follow the steps mentioned below and complete the process to close RD online in a post office:

Step 1: Navigate to the official webpage of Indian Post or click on https://www.indiapost.gov.in.

Step 2: Using your net banking credentials, like your user ID and password, log in to your account.

Step 3:  Type the One Time Password or OTP you received on your registered mobile number.

Step 4: Navigate to the section ‘General Services’ and select ‘Service Requests’.

Step 5: Look for the option ‘New Request’ and click ‘Closure/pre-closure of RD accounts’.

Step 6: You need to choose your RD account type and click on ‘Go’. 

Step 7: Type in your Recurring Deposit account number, choose credit account and click on the option, 'submit online'.

Step 8: Type your password for the transaction and click on the ‘submit’ button to close RD account.

Step 9: A reference number or acknowledgement number will be generated. Note it down.

Step 10: After successful processing, you will receive your RD amount within 24 hours.

Process to Close RD Account Offline at Post Office

If you have an RD account at your local post office, follow the steps below to close it offline:

Step 1: Go to your post office branch where you have your RD account.

Step 2: Fill out ‘Form 2’ or ‘premature closure of account’ with all necessary details.

Step 3: Submit your duly filled form and passbook to the representative at the post office.

Step 4: The representative will process your RD closure request and give you an acknowledgement slip.

Step 5: You will receive your RD amounts in your account after some days. 

Final Thought

Recurring Deposits provide a stable yet safe income at a higher interest rate than a traditional savings account. However, in emergencies, you might need to close RD and withdraw RD amounts prematurely. While breaking an RD account is not advisable, you can close it early, either online or offline, by paying the applicable penalty charges.

Signing up for Recurring Deposits is now easy with Stable Money. Download the Stable Money app today to start investing in RD and earn returns of up to 9.10% on your investment.