Even as interest rates are trending lower for quite some time now, bank fixed deposits (FDs) continue to lure conservative investor class such as senior citizens who given the Covid 19 led uncertainty and market volatility do not want to give in to market linked instruments for fetching higher return.
Plus the other benefits such as high liquidity, ease of investment, assured return, higher premium of usually 0.5% to senior citizens continue to lure senior citizens to FD products. Plus amid the pandemic crisis, banks across the board have come up with special FD schemes for such citizens for limited time frame i.e. until September 30, 2020 that provide a still better return for an FD locked in for 5 years and above at the lender:
Also, as per BankBazaar innumerable number of senior citizens depend on monthly, quarterly, half-yearly or annual pay-out from such non-cumulative FD products in order to meet out their daily expenses.
Laddering Technique To Offer Better Reward From Fixed Deposits
For better return or reward from FDs, there is suggested a technique called laddering wherein the person's excess funds can be segregated to form several FDs maturing in different timeframes and then reinvesting them if possible to form an investment chain.
Here is an illustration for the same: Say you want to mobilize your capital of Rs. 5 lakh into bank FDs then instead of opting for a single FD worth Rs. 5 lakh break the amount and get 5 FDs made of Rs. 1 lakh each with tenure of 1 year, 2year, 3 year, 4 year and 5 year, respectively.
This way you will be able to tide over any reinvestment risk and may also reward from any interest rate surge in the future. Also, if there is any urgency on the financial front, you may not be forced to break your FD prematurely and lose interest rate on it.
Now here given the scenario when FDs continue to be the sought after investment option tool, we will tell you which bank for what tenure offer the best return on bank FDs to senior citizens:
|Bank||Less than or equal to 1 year tenure||More than 1 year to less than or equal to 2 years||More than 2 to less than or equal to 3 years||More than 3 to less than or equal to 5 years||More than 5 years|
|State Bank of India||5.6%||5.6%||5.8%||6.2%||6.2%|