For most of the investors, poor bank fixed deposit (Bank FD) returns have rendered them undesirable. Interest rates of Bank FD have dropped to the peaks reported in 2004-05. SBI Bank offers interest rates across various tenures of between 2.9 per cent and 5.4 per cent. The FD interest rates of the current bank are nearly at the line with the savings bank account. In addition, bank FDs offer lower interest than bank savings accounts for short durations. There is no reason to get upset, though. For certain post office saving plans, NPS and bank FDs of smaller banks, you can still gain marginally better yields than a bank deposit. Let's take a glance at the possibilities:
Small Finance Bank FDs
On fixed deposits (FDs), such as Utkarsh Small Finance Bank offer interest rates as high as 8 per cent to 8.50 per cent. Senior citizens, as opposed to general citizens, receive 50 basis points more on these deposits. Compared to other top lenders, such as the State Bank of India (SBI), HDFC Bank, ICICI Bank, Axis Bank and others the interest rates provided by small finance banks are definitely attractive.
Kisan Vikas Patra (KVP)
A single individual or an adult on behalf of a minor or jointly can invest in KVP at a fixed interest rate of 6.9 per cent compounded annually. From any Departmental Post Office, KVP can be purchased. After 2 and 1/2 years from the date of issue, the certificate can be encashed respectively.
Senior citizen Savings Scheme (SCSS)
SCSS allows individuals of age 60 years or more to invest and deposit only once with a maximum amount of Rs 15 lakh for which they can cherish an interest rate of 7.4% per annum. Depositors can manage more than one account, either individually or jointly with their spouse. The period of maturity is five years. Following maturity, the account can be extended for an additional consecutive period of 3 years. On the 1st working day of April, July, October and January, quarterly interest shall be payable under SCSS.
5-year National Savings Certificates
In order to diversify their fixed income portfolio, NSCs are very trendy compared to other post office savings schemes among the investors. For those who need capital security, these certificates are reliable and valuable too. At present, NSCs provide an interest rate of 6.8 percent compounded annually but payable at maturity. Under Sec 80C of the IT Act, NSC deposits count for tax benefits. It is also possible to purchase certificates on behalf of a minor over 10 years of age. However, the interest received for the first four years is reinvested and the interest earned for the fifth year is subject to tax in compliance with the applicable tax slab rate of the investor.
National Pension System Tier II
NPS Tier II is a voluntary scheme and it is a necessity for opening Tier II accounts to have an NPS Tier I account. If you are not a Central Government employee seeking a deduction under Section 80C for your deposits to the Tier II Account, you can invest from the Tier II Account at your sole convenience. In the previous year the NPS Tier II Account Scheme G, that invests in government bonds and associated instruments, has generated double-digit returns. 11.84 per cent is the total return in the classification. Whereas SBI Bank gets you an interest rate of 5.1 per cent for a one-year fixed deposit which is much lower compared to NSC.
RBI Floating Rate Savings Bonds
The maturity period of the RBI Savings Bond is seven years. As of July 1, the Government of India has approved the issue of Floating Rate Savings Bonds. For the period from 1 July to 31 December, the interest rate is 7.15%, which will be effective on 1 January of the coming year. The RBI Floating Rate Savings Bond interest rate will be adjusted six months of every fiscal year. Return on the RBI Floating Rate Savings Bond is completely taxable and tax will be deducted from time to time during the calculation of interest rate on bonds. For a minimum amount of Rs1,000 with no upper limit, an investor can invest in bonds and also can take the benefit of premature withdrawal facility.
Post Office National Savings Monthly Income Account
With a maximum deposit limit of Rs 4.5 lakh for a single account holder and Rs 9 lakh for the joint account holder with up to (3 holders), one can invest in POMIS for a maturity period of 5 years. An account can also be opened by a minor over the age of 10 by a guardian or legal heir. Hence, currently, an interest rate of 6.6 percent payable monthly is provided by POMIS.