SBI FD Vs Post Office Savings Schemes: Which Can Be A Good Investment Bet For Senior Citizens?

In the current scenario where investment in stocks is alarming in terms of defaults in some of the categories and markets are in the crisis period, fixed deposits of banks are the first option for the senior citizens to keep their investments secure. Here, compared to what is being provided by small savings schemes of the post office, we will check at the fixed deposit provided by the largest commercial giant SBI and perceive what they have to deliver on their FDs.

SBI Special FD Scheme For Senior Citizens

SBI is now promising 5.40 percent interest on FDs for a period of 1 year to less than 2 years, and 6.20 percent per annum for senior citizens for a period of 5 years to 10 years. The rates are valid from Sept 10, 2020. But apart from this regular interest rates SBI 'WECARE' Senior Citizens' Term Deposit Scheme for Senior Citizens was revealed in May this year by the nation's top lender. The scheme with a tenure of 5 years or more was introduced to support senior citizens who have an age limit of 60 years or more with higher interest rate in the ongoing pandemic phase which is now available till March 31, 2021.

Typically, most banks give senior citizens around 50 basis points higher returns than their benchmark yields. Currently, SBI promises that it will have an additional 30 basis points over and above this interest of 50 basis points. If a senior citizen deposits under the special FD scheme for up to Rs 2 crore, then the interest rate applicable to him or her is 6.2 per cent. An additional premium of 30 bps not payable on premature withdrawal and a penalty of 0.5 percent can be applicable to senior citizens under this special FD scheme.

SBI Senior Citizen FD Rates

Tenure	Senior Citizens FD Rate
7 - 45 days	3.40%
46 - 179 days	4.40%
180 - 210 days	4.90%
211 days - upto 1 yr	4.90%
1 yr - upto 2 yrs	5.40%
2 yrs - upto 3 yrs	5.60%
3 yrs - upto 5 yrs	5.80%
5 - 10 yrs	6.20%

Post Office Small Savings Schemes

Here is some positive news for senior citizens despite all the pessimism. The government has kept interest rates steady for various small savings schemes such as PPF, NSC, KVP, SCSS, among others for the current quarter. At the beginning of every quarter of the fiscal year the interest rate on the PO savings schemes is updated by the government depending on the returns on government bonds. The PPF will continue to fetch 7.10% and the Senior Citizen Savings Scheme (SCSS) will fetch 7.40% as before, as per the latest circular dated September 30, 2020. Likewise, depending on the tenure of deposits, post office time deposits will continue to fetch between 5.5 percent and 6.7 percent. Whereas the 5-year Monthly Income Scheme, National Savings Certificate, and Recurring Deposit will fetch an interest rate of 6.6 per cent, 6.8 per cent and 5.8 per cent respectively.

Our take

After the current rate cut on one-year FDs by the State Bank of India (SBI), the one-year FD now attracts 5.40 percent to senior citizens effective from September 10, 2020. In contrast to this the one-year post office time deposit interest rate is 5.5 percent. Not just that, SBI's special FD scheme is currently attracting an interest rate of 6.2 percent for a 5-year of maturity term, but if compared with the above discussed interest rates of 5-year Monthly Income Scheme and National Savings Certificate the returns are much lower. What we have found at last is that as compared to bank FDs, the small savings schemes of post office are still providing higher returns along with tax benefits under section 80C of the Income Tax Act. That being said, fixed deposits of Small Finance banks may provide you higher returns than post office schemes. Hence, it will be a smart decision if you as a senior citizen consider first the risk profile, tax bracket, and the liquidity of funds before making a bet.

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