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Post Office MIS and Recurring Deposit Combo: Safe investment, great returns

The Post Office Monthly Income Scheme (MIS) is quite popular among investors. But is there any way the returns from such a safe investment be enhanced further?

Yes, there is! Read on.

In “An introduction to Post Office Monthly Income Scheme (PO MIS)”, we saw the various characteristics of the PO MIS scheme.

The basic feature of PO MIS is safe, periodic returns. You get a monthly interest on the amount invested.

But this also means that you just get a simple interest – you get an interest on the original amount invested, but you don’t get any interest on the interest you earn on that amount.

This is because this interest is not invested back – instead, it is given to you every month.

You can increase the overall return from your MIS investment if you do not need the monthly interest. In that case, you can invest this monthly return, and earn interest on it as well!

Thus, effectively, you would earn a compound interest on your original MIS investment!

MIS and Recurring Deposit Combination – The perfect match

Does it sound too difficult? Don’t worry – there is a clean and easy way to achieve this!

In “An introduction to Post Office (PO) Recurring Deposit (RD) Account”, we saw that the post offices in India offer the facility of a recurring deposit account.

What is a recurring deposit account? You invest a fixed sum every month, you earn interest on it, and you get back the amount with interest at maturity.

(To know more about recurring deposits, please read “An introduction to Recurring Deposit”)

So, here we have two products – one that gives you a fixed monthly income, and another that needs a fixed monthly investment.

The conclusion is quite obvious – you can invest the monthly interest you receive from MIS into the RD account, so that you earn even more interest!

How can this be achieved?

So, do you have to go to the post office every month, get your MIS interest money and deposit it in your PO recurring deposit account?

No! In this age of automation, that would be too much trouble!

It’s quite easy: You just have to instruct your post office to deposit the MIS interest in your RD account every month! That’s it – it is a one time instruction that you have to give at the time of opening your MIS and RD accounts!


As discussed, the most important advantage is that you earn a compound interest – you earn interest in your original (MIS) investment, and an interest on that interest!

Also, since both MIS and PO RD are operated by the post office, which in turn is operated by the Government of India, the investment is absolutely safe.

Bottomline: You earn even more through risk-free investments!

(Please check “Post Office Schemes: Downloadable Forms” to download forms for opening the PO MIS account, PO recurring deposit account, etc)


Of course, PO RD is not the only avenue for investment that needs monthly investments.

Another good option is to invest the monthly interest from PO MIS into a Systematic Investment Plan (SIP) of a mutual fund (MF) scheme.

(To know more about SIPs, please read “Systematic Investment Plan (SIP) – A rupee a day, keeps worries away” and “More on Systematic Investment Plan (SIP) and Micro SIP”)

Here, you would need to instruct the post office to deposit the MIS interest amount in your bank account, and you would have to instruct the MF to deduct the amount from your bank account.

Also, investments in MFs are subject to market fluctuations. Thus, your overall return would vary depending on the performance of the MF scheme for which you have a SIP.


If you are risk averse, and want high risk-free return, the Post Office Monthly Income Scheme (PO MIS) and Post Office Recurring Deposit (PO RD) combination is one of the best options available to you.

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