Monthly Income Scheme or MIS considered to be primarily offered by Post Office are also offered by banks. Such plans enable a regular earning on a monthly basis as interest amount on lump sum payment and are suitable for retirees or individuals with surplus funds that they can deploy in such schemes.
The UCO Bank, began its Monthly Income Scheme with a 5 year term, somewhere towards the end of Dec 2013. However, since then interest rates have fallen and the bank has also modified its scheme to reflect the downturn in interest rates. Perhaps the scheme is converted into a normal term deposit scheme.
What are the interest rates on the UCO Bank Monthly Income Scheme?
The interest rates have fallen dramatically from levels of 9 per cent plus, to a meagre 6.35 per cent p.a for regular investors. For the senior citizens, bank's staff, ex-staff, and senior citizen ex-staff are provided incentive as per the norms.
Simple interest on a monthly basis is provided without discounting from the 1st day of the next month of opening the scheme. So, for a deposit of Rs. 1,00,000 an investor will earn Rs.6350 as interest income divided over a year, so the monthly income will turn out to be roughly Rs. 529.16.
How much to invest in the UCO Bank Monthly Income Scheme?
You need to invest a minimum sum of Rs 50,000 under the scheme and a maximum that an investor can invest is Rs. 1 crore.If you place just Rs 50,000, you are likely to get a very paltry sum by way of monthly interest, given that the scheme is offering just 6.35 per cent interest. Remember, that if you are paying tax on the interest rate, your returns would also fall dramatically.
Also, an interest income of over Rs. 10,000 on an annual basis on monthly income scheme of UCO Bank shall be eligible for tax deduction at source, which will further reduce your return from the investment.
What we would recommend investors to do is invest in the post office Monthly Income Scheme, where you get a pretty decent interest rate of 7.60 per cent. We do not expect interest rates on post Office to fall below that of the UCO Monthly Income Scheme. Hence what we recommend is go for the post office scheme. Like UCO Bank the amount is safe, as it is backed by the government of India.
Other features of the UCO Bank Monthly Saving Scheme
The other normal features of a bank deposit would apply. For example, nomination facility and loan facility is available on the UCO Bank Monthly Income Saving Scheme.
On, premature withdrawal, interest would be payable at 1% below the applicable rate.
In the case when there is no specific mandate given by the investor at the time of opening the scheme, the proceeds on maturity shall be transferred to his savings or current account or the account may be renewed for some period at the prevailing rate of interest.
The Monthly Income Scheme of UCO Bank is non-transferable but can be transferred from one bank branch to the other in the same name.
Bank deposits have not been the best proposition in the last few years as interest rates have fallen. We suggest that those investors who are planning to invest should invest in monthly income deposits offered by some of the Non Banking Finance Companies, also called NBFCs.
Also, investors for a similar term of 5 years lock-in can consider tax-saving FDs that offer comparably better rate of return and tax benefits that can be claimed under section 80C. Company fixed deposits with good rating can also be betted upon for better returns.