Last year, some of the country's top lenders, including State Bank of India, HDFC Bank, ICICI Bank, and Bank of Baroda, launched special fixed deposit schemes for elderly folks in order to safeguard interest rates and senior citizens' trust in fixed deposits amid falling interest rates of bank deposits due to COVID and economic slowdown. Under these schemes, the banks pledged to provide older citizens an additional 0.25 percent premium in addition to the existing 0.50 percent premium on deposits of less than Rs. 2 Cr expiring in 5 years to less than 10 years.
Should senior citizens invest in special fixed deposit schemes?
Following its bi-monthly monetary policy conference, the RBI decided to hold the repo and reverse repo rates constant on December 8, 2021, which implies that fixed deposit investors would have to wait longer for interest rates to return to normal levels. Interest rates on fixed deposits are at multi-year bearish as a result of lower policy rates, and investing in special fixed deposit schemes may be a good bet for older adults considering a long-term financial aim.
But we do not recommend that older persons invest in special fixed deposit schemes since long-term deposits do not earn higher interest rates than short-term deposits in a dropping interest rate scenario. To put it another way, whenever interest rates go up, banks raise interest rates on short to medium-term deposits first and not on long-term deposits.
For example, on December 1, 2021, HDFC Bank raised interest rates by 10 basis points on fixed deposits maturing in seven days to one year. As a result, if senior citizens invest in senior citizen deposit schemes, their deposits will be locked-in for 5 to less than 10 years, attempting to make them a victim of interest rate risk, as they will miss out on the new and hiked interest rates on short-term bank deposits during an interest rate rise in the market.
They can use the fixed deposit ladder strategy to deposit a small fixed amount over time in various tenors. For example, if a senior citizen has Rs 5 lakh of lump sum money, he or she can split it into 1 lakhs and deposit Rs 1 lakh each with varying tenures of one year, two years, three years, four years, and five years. When each deposit matures, renew it for another 5 years, ensuring that he or she is going to get higher average yields and avoid interest rate risk by not locking all deposits for a fixed term at a low-interest rate.
Another option is to invest in secure plans such as the Senior Citizen Saving Scheme (SCSS), Pradhan Mantri Vaya Vandana Yojana (PMVVY), Post Office Monthly Income Scheme (POMIS), or RBI Floating Rate Savings Bonds with the diversification of special fixed deposit schemes to minimise their liquidity and returns apprehensions. As a result, reading this article is just for informational purposes and does not constitute an investment recommendation.
SBI Special Fixed Deposit Scheme
For Senior Citizens, SBI provides the "SBI Wecare" Deposit, which allows them to earn an additional premium of 30 basis points over and above the regular 50 basis points on retail term deposits of less than Rs. 2 crore maturing in the '5 Years and Above' tenor only. The "SBI Wecare" deposit scheme is valid until March 31, 2022, and SBI's current interest rates on FD for senior citizens are as follows.
|Tenors||Senior Citizens w.e.f. 08.01.2021|
|7 days to 45 days||3.4|
|46 days to 179 days||4.4|
|180 days to 210 days||4.9|
|211 days to less than 1 year||4.9|
|1 year to less than 2 year||5.5|
|2 years to less than 3 years||5.6|
|3 years to less than 5 years||5.8|
|5 years and up to 10 years||6.2|
|Source: Bank Website. W.e.f. 08.01.2021|
HDFC Bank Senior Citizen Care FD
During the Senior Citizen Care FD offer, which is valid till March 31, 2022, elderly folks who make deposits of less than 5 crores for a term of 5 years One Day to 10 Years would receive an additional premium of 0.25 percent over and above the existing premium of 0.50 percent. This special fixed deposit offer is only for resident senior citizens and the rates are applicable on both new and renewal of existing deposits. Here are HDFC Bank's latest interest rates on fixed deposits for senior citizens.
|7 - 14 days||3.00%|
|15 - 29 days||3.00%|
|30 - 45 days||3.50%|
|46 - 60 days||3.50%|
|61 - 90 days||3.50%|
|91 days - 6 months||4.00%|
|6 months 1 day - 9 months||4.90%|
|9 months 1 day < 1 Year||4.90%|
|1 year 1 day - 2 years||5.50%|
|2 years 1 day - 3 years||5.65%|
|3 year 1 day- 5 years||5.85%|
|5 years 1 day - 10 years||6.25%|
|Source: Bank Website. W.e.f. 01.12.2021|
ICICI Bank Golden Years FD
Senior adults can also take advantage of ICICI Bank's "Golden Years FD" fixed deposit plan. Senior residents would receive an additional 0.20 percent interest rate over and above the existing additional rate of 0.50 percent annually under this scheme. This rate applies to single deposits of less than Rs. 2 crore with maturities ranging from 5 years and 1 day to 10 years. This deal, according to the bank, is effective until April 8, 2022. As of now, senior citizens will get the following interest rates on their fixed deposits from ICICI Bank.
|7 days to 14 days||3.00%|
|15 days to 29 days||3.00%|
|30 days to 45 days||3.50%|
|46 days to 60 days||3.50%|
|61 days to 90 days||3.50%|
|91 days to 120 days||4.00%|
|121 days to 150 days||4.00%|
|151 days to 184 days||4.00%|
|185 days to 210 days||4.90%|
|211 days to 270 days||4.90%|
|271 days to 289 days||4.90%|
|290 days to less than 1 year||4.90%|
|1 year to 389 days||5.40%|
|390 days to < 15 months||5.40%|
|15 months to < 18 months||5.40%|
|18 months to 2 years||5.50%|
|2 years 1 day to 3 years||5.70%|
|3 years 1 day to 5 years||5.90%|
|5 years 1 day to 10 years||6.30%|
|5 Years (80C FD)||5.90%|
|Source: Bank Website. W.e.f. 04.12.2021|
Bank of Baroda Special Fixed Deposit Scheme For Senior Citizens
Bank of Baroda also offers a special fixed deposit scheme for senior citizens, under which they can enjoy an additional rate of 1.00% over and above the rate of 0.50% on their deposits maturing in above 5 years to up to 10 years tenor. According to the bank's website, the scheme is valid till 31.03.2022. Here are the bank's current interest rates on fixed deposits for senior citizens only.
|Tenure||Senior Citizen FD Rates|
|7 days to 14 days||3.30%|
|15 days to 45 days||3.30%|
|46 days to 90 days||4.20%|
|91 days to 180 days||4.20%|
|181 days to 270 days||4.80%|
|271 days & above and less than 1 year||4.90%|
|Above 1 year to 400 days||5.50%|
|Above 400 days and up to 2 Years||5.50%|
|Above 2 Years and up to 3 Years||5.60%|
|Above 3 Years and up to 5 Years||5.75%|
|Above 5 Years and up to 10 Years||6.25%|
|Source: BOB, W.e.f. 16/11/2020|