Post Office FD Vs State Bank Of India FD: Where To Invest?

Following the Reserve Bank Of India (RBI) repo rate hike, several banks and NBFCs also hiked their deposit rates. However, the RBI repo paused the rate hike at the last meeting held this month after six straight hikes totalling 250 bps since May 2022.

Recently the government also raised interest rates on small savings schemes backed by the central government such as post office time deposit (Post Office FD), making it one of the attractive investment destinations for small investors.

Bank FDs are one of the great ways to earn safe and secure high returns as bank FDs are covered up to Rs 5 lakh by the Deposit Insurance and Credit Guarantee Corporation (DICGC). Whereas, Post Office FDs are one of the most secure FDs as it is backed by the central government of India.

State Bank Of India (SBI) FD

Banks have begun raising FD rates in response to the RBI's recent increase in the repo rate since May 2022. The recent hike by Post Office FD encouraged us to compare both. Here we compared the latest Interest Rate on FDs offered by India's largest lender, the SBI on deposits up to Rs 2 crore and compared it with the Post Office FD.

SBI revised the interest rates on retail domestic fixed deposits below Rs 2 crore with effect from 15th February 2023. According to the bank's official website, the public sector bank is currently offering the following interest rates:

SBI Fixed Deposit Interest Rates w.e.f. 15 February 2023

Tenors	General Public Rates (in % p.a.)	Senior Citizen Rates (in % p.a.)
7 days to 45 days	3	3.5
46 days to 179 days	4.5	5
180 days to 210 days	5.25	5.75
211 days to less than 1 year	5.75	6.25
1 Year to less than 2 years	6.8	7.3
2 years to less than 3 years	7	7.5
3 years to less than 5 years	6.5	7
5 years and up to 10 years	6.5	7.50@
400 days (Special Scheme i.e. " Amrit Kalash")	7.1	7.6

Source - SBI.co.in

Please Note - @Including additional premium of 50 bps under "SBI We-care" deposit scheme.

Other than this, the bank is also offering a specific tenor FD of "400 days" (Amrit Kalash) at a Rate of Interest of 7.10 % with effect from 12t April 2023. Under this scheme, senior citizens are eligible for 7.60% interest rate. The scheme will be available for valid till 30 June 2023, according to the bank's official website.

Post Office Fixed Deposit

Post Office offers a greater interest rate than SBI FDs do on the deposit period of 5 years. The Post Office office FD with maturity period of 1 year, 2 years, 3 years and 5 years. On the FD tenure of 1 year, you can receive up to 6.8% interest, whereas if you deposit money for a term of 5 years at a post office, you can earn up to 7.5% interest. The Post Office is offering 6.9% interest on 2-year tenure and 7% on 3-year tenure. According to the Post office website, the new rates are effective from 1 April 2023 to 30 June 2023.

Interest rates From 01.04.2023 to 30.06.2023

Period	Rate
1yr.A/c	6.80%
2yr.A/c	6.90%
3yr.A/c	7.0​%
5yr.A/c	7.50%

Source - Indiapost.gov.in

According to the post office, "Account can be opened with a minimum of Rs. 1000 and in multiple of Rs. 100. No maximum limit for investment. Interest shall be payable annually, No additional interest shall be payable on the amount of interest that has become due for payment but not withdrawn by the account holder. The investment under 5-year TD qualifies for the benefit of section 80C of Income Tax Act, 1961."

Opening an FD account with a bank or post office is the easiest way to earn a fixed annual interest rate on your small savings. Due to the simplicity of account management and flexibility of withdrawal at any moment, FDs are appealing to depositors who seek to earn high and secure returns on small savings in the form of FDs.