RD Missed Installment: An RD (Recurring Deposit) is considered a good option for growing money safely. It requires you to deposit a fixed amount every month, upon which the post office or bank pays interest. It works effectively if you make the deposits regularly. But what happens if you forget to deposit an installment for a particular month?

Missing a single installment does not usually mean the bank will immediately close the RD. Banks generally allow the account holder time to deposit the outstanding installment, although a charge may apply.

However, if installments remain unpaid for several months, the situation can become serious. The RD may be classified as irregular and could eventually be closed prematurely. This can impact both the continuation of the RD and the final maturity amount.

First, let’s understand what an RD is.

An RD is a savings scheme where you deposit a fixed amount into the bank every month. For instance, if you start a 2-year RD and deposit ₹5,000 monthly, you will have deposited ₹1.20 lakh over 24 months. The bank pays interest on this amount, and upon completion of the 2-year term, you receive the deposited money along with the accrued interest.

What happens if an installment is missed?

According to Adil Shetty, CEO of BankBazaar, public and private sector banks may charge a penalty of approximately ₹1.50 for every ₹100 of the monthly installment. Suppose your monthly installment is ₹10,000; missing a single month's payment could result in a penalty of around ₹150.

The RD can be regularized again by depositing the outstanding installment and the penalty. The specific timing of the penalty charge depends on the bank's policies.

After how many months of non-payment will the RD be closed?

Banks generally do not close the RD immediately after the first missed installment. Adil Shetty notes that many banks offer the option to regularize an RD account even after 5–6 consecutive missed installments.

During this process, the outstanding installments and applicable penalties must be paid. However, the specific limits may vary depending on the bank and the RD scheme.

What happens if multiple installments are missed?

An RD account may become irregular if installments are not paid for several consecutive months. According to Adil Shetty, the RD could be closed prematurely if installments remain unpaid for six months.

Subsequently, the facility to make further deposits may be revoked. In accordance with bank rules, the accumulated amount may be transferred to the linked savings account.

Can the RD be revived before closure?

If the bank's stipulated limit has not yet been exceeded, the RD can be regularized by paying all outstanding installments and penalties. If the RD is closed prematurely, the maturity payout may be reduced; the bank might pay interest based on the actual duration of the deposit, and a penalty for premature closure could also be levied.

Therefore, missing a single installment is not a major issue. However, failing to pay installments for several months could lead to the closure of the RD and impact the expected maturity amount.

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