The SBI Reinvestment FD plan as the name suggest is a fixed deposit scheme by the state-run lender and the minimum investment amount under the scheme is Rs. 1000 while the tenure can be as per investor's call from 6 months to 10 years. Here in the interest is compounded and paid at the time of maturity. Notably, there is no maximum limit with regard to investments.
Few of the important points to be noted with regard to the SBI scheme:
1. Just like any other FD scheme, the re-investment FD plan by SBI exercise auto renewal in a case where there are no instructions given for renewal or redemption.
2. Interest is compounded quarterly but is payable only annually and the rate of interest is the same as the interest on any other FD scheme by the banker. Given the elections round the corner and in its view anticipated cash crunch is also pushing banks to mobilize funds by increasing interest rates on deposits.
3. A pre-mature withdrawal facility is available with penalty charges- For individual term deposits of less than Rs. 5 lakh, 0.5% shall be charged for redeeming the investment before maturity time frame and for over deposits of Rs. 5 lakh and less than Rs. 1 crore, individuals will be charged 1% charges.
The interest shall be 0.50% or 1% below the rate applicable at the time of deposit for the period deposit remaining with the bank or 0.50% or 1% below the contracted rate, whichever is lower. However, no interest will be paid on deposits which remain for a period of less than 7 days.
In case the 15G or 15H form is not submitted the bank, TDS is applicable to be deducted at the prevailing rate.
An SBI Reinvestment FD Plan offers loan or overdraft facility up to 90% of the deposit amount and in addition accrued interest, at 1.00% above the STDR (special term deposit rate).
So, the investment product varies only in respect of the interest payment which is paid only at the time of maturity and not at a regular period. Regular interest is added to the principal and compound interest calculated and paid thereon. Individuals interested to open this FD scheme can either visit SBI branch or invest via OnlineSBI.