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SBI Reinvestment Plan: Works Like A Regular FD But With A Twist

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From zero balance savings account to a variety of loan schemes, the largest lender of India, SBI offers a range of products to its customers. Though State Bank of India (SBI) provides a plethora of fixed deposit schemes such as Term Deposit, Tax Savings Fixed Deposit, SBI Multi Option Deposit, SBI Annuity Deposit and Reinvestment Plan. Among these fixed deposit options, SBI Reinvestment Plan Fixed Deposit just works like a regular term deposit scheme but with a twist. The interest on an SBI Reinvestment Plan is only paid out when the plan reaches maturity, and not on regular frequency during the period of deposit. Standard term deposit interest rates are applied to the principal amount and compound interest is determined and then paid out to the depositor. So without wasting time, let's know about this plan in brief.

 

Features of SBI Reinvestment Plan
 

Features of SBI Reinvestment Plan

  • Individual residents, whether individually or jointly, Minors (either individually or through their Guardians), HUF Kartas, Firms, Companies, Local Bodies, and Government Departments are eligible for this scheme.
  • This special deposit comes with a minimum period of deposit of 6 months up to a limit of 10 years.
  • This scheme is available at all SBI branches across India.
  • One can open this scheme by making an initial contribution of Rs. 1,000/- and thereafter in multiples of Rs. 100/-.
  • There is no upper limit on maximum deposit.
  • SBI Reinvestment Plan interest rates are the same as term deposit rates, with quarterly compounding. Upon maturity, the accumulated interest rate along with the principal amount is paid to the depositor. The interest rate shall be 0.50 per cent or 1% below the rate applicable at the time of deposit for the duration the deposit lasted with the bank, or 0.50 per cent or 1% below the contracted rate, whichever is lower.
  • On the other hand, no interest will be paid on deposits that are kept for less than 7 days.
  • A deposit of Rs 2 Cr will be treated as a bulk deposit under this scheme.
  • If no maturity directions are given, SBI automatically renews its Reinvestment FD Plan.
  • A nomination facility is also available under this scheme.
  • The bank branch will not pay in cash for Term Deposit with interest of Rs. 20000/- and more.
  • One can transfer the scheme/account from one branch to another.
  • The option of withdrawing early is available. The penalty for premature withdrawal on a retail fixed deposit (FD) up to Rs 5 lakh is 0.50 per cent. A 1% penalty is applied to retail fixed deposits of more than Rs 5 lakh but less than Rs 1 crore.
  • For an SBI Reinvestment FD Plan, tax is deducted at the source. If Form 15G/15H is not submitted, TDS is deducted at the prevailing income tax rate.
  • At 1.00 per cent over the STDR (special term deposit rate), an SBI Reinvestment FD Plan provides a loan or overdraft facility up to 90% of the deposit amount including accrued interest.
Loan facility

Loan facility

Customers can take out a loan or overdraft for up to 90% of their deposit plus interest, at a rate of 1% higher than the fixed deposit interest rate. With the following applicable margin, a loan against deposit is permitted:

Tenure of depositMargin
Up to 36 Months 5 %
More than 36 months & up to 60 months 10 %
More than 60 months 15 %
Source: SBI

4 Risks of Investing In Fixed Deposits

SBI Reinvestment Plan Interest Rates

SBI Reinvestment Plan Interest Rates

The reinvestment plan of SBI is similar to Term Deposits, except by receiving interest on a regular basis during the deposit period, you will get the interest payout on maturity. Regular interest is applied to the principal, and compound interest is determined and paid upon maturity.

TenureRegular FD Rates In %Senior Citizen FD Rates In %
7 days to 45 days 2.9 3.4
46 days to 179 days 3.9 4.4
180 days to 210 days 4.4 4.9
211 days to less than 1 year 4.4 4.9
1 year to less than 2 year 5 5.5
2 years to less than 3 years 5.1 5.6
3 years to less than 5 years 5.3 5.8
5 years and up to 10 years 5.4 6.2
Source: SBI, W.e.f. 08.01.2021

Read more about: sbi fd fixed deposit investment
Story first published: Wednesday, June 9, 2021, 9:37 [IST]
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