Missed an RD Installment? Will Your Account Close? Check Penalty and Key Rules

Have you missed an RD (Recurring Deposit) installment? Don’t worry; banks do not close the account if just one or two installments are missed. Find out about late payment penalties, when an account gets closed, and how you can regularize your RD by paying the outstanding installments.

In a Recurring Deposit (RD), you are required to deposit an installment on a fixed date every month. However, if your RD installment isn’t deposited on time due to a delayed salary, insufficient bank balance, or an emergency, the account isn’t closed immediately. According to bank rules, if you miss one or two installments, you get the opportunity to deposit the outstanding amount by paying a late payment penalty.

However, if you fail to deposit installments for four to six consecutive months, the bank may declare your RD account ‘irregular’ and close it prematurely (pre-closure). Naturally, the primary concern in such a situation is whether the entire RD will be shut down. Does that actually happen? Let’s find out.

The account does not close if a single installment is missed

The good news is that banks do not immediately close the account if you miss a single RD installment. You may, however, have to pay a penalty for the delay. The penalty amount and the method of collection vary from bank to bank. The real problem arises when installments remain unpaid for several consecutive months.

You can restart the RD by paying the outstanding amount

After missing an installment, banks usually give the customer a chance to regularize the RD by depositing the outstanding amount. In many cases, there is a provision to pay off missed installments accumulated over five or six consecutive months. During this process, you are required to pay the applicable penalty along with the overdue installments. Please note that the timeframe for this varies across different banks and RD schemes.

What happens if installments are not paid for a long period?

If a customer fails to pay installments for an extended period, the bank may classify the RD account as ‘irregular.’ If installments remain unpaid for six consecutive months, the RD may be marked irregular and subsequently closed prematurely. In such a scenario, the facility to deposit future monthly installments may also be revoked. While some banks might transfer the remaining balance to the customer’s linked savings account, this depends entirely on the specific bank’s policies.

Points to keep in mind

If you miss one or two installments, regularize the RD immediately by paying the outstanding amount and the penalty.
Check with your bank regarding the deadline for paying penalties and arrears, as rules vary from bank to bank.
Failure to pay installments for a prolonged period can lead to the account being closed, so do not ignore the issue.

Conclusion

There is no need to panic if you miss an RD installment; however, ignoring it for too long can negatively impact the interest you earn. To keep your account active, deposit the outstanding amount and any applicable penalty on time. You can permanently avoid the risk of missing installments by setting up an auto-debit facility. (Note: Please verify the exact terms regarding late penalties and premature closure with your bank’s nearest branch or official website.)