Recently, amid falling interest rates, SBI as an incentive to attract senior citizens launched a special retail deposit scheme called 'SBI Wecare Deposit' with a marginally higher premium of 30 bps. Usually senior citizen investor community on FDs is provided a 0.5% return higher than the general public. But in the schema, the additional 30 bps or 0.3% premium is for fixed deposits (retail term deposits) which are parked for investment of 5 years or more.
So, in total if the senior citizen investor in SBI Wecare Deposit remains invested in the scheme for 5 years or more he or she shall be entitled to get 0.8% premium over the general market rate.
Currently, after the recent revision for deposits below Rs. 5 crore that becomes effective from May 12, 2020, an FD with SBI for 5 years and up to 10 years fetches 5.7% while senior citizens will be able to get 6.5% per annum.
Here is detailed whether the scheme is really lucrative and should or not senior citizens should consider betting on the scheme as it is a limited period offering until September 30, 2020.
Deposit rates in the scheme offered to senior citizens now comparable to other private sector banks:
ICICI Bank as per its revised interest rates w.e.f April 3, 2020 offers rate at par with SBI's Wecare Deposit scheme of 6.5% per annum to its senior citizens for deposits of 5 years and 1 day upto 10 years.
Similarly, HDFC Bank also offers 6.5% rate of interest on deposits below Rs. 2 crore with a tenure of 5 years and 1 day to upto 10 years to senior citizens. For deposits of over Rs. 2 crore, senior citizens get 5.75% rate of interest.
There are other banks from the public and private space that are currently offering lower rates than SBI Wecare deposit scheme to senior citizens such as the Bank of Baroda which offers just 6.2% interest rate for deposits of 5years or more with the bank.
So, given the crisis facing private sector banks after the recent Yes Bank fiasco, a deposit at SBI could be a rather safe bet.
Liquidity is another factor that makes the investment a good bet:
Though senior citizens can also bet on senior citizens savings schemes that even provides tax deduction benefit under section 80C, nonetheless the penalty in case of premature withdrawal from the instrument is hefty while that in the case of SBI's Wecare scheme one will have to forego the additional 30 bps premium i.e. in that case will earn just 6.2% per annum. As per the latest revision, SCSS provides 7.4% return for a tenure of 5 years.
So, with competitive rates being offered on SBI's Wecare scheme you can take the advantage and put your surplus funds in it to get a higher return of 6.5%. And if your assured of keeping your investments intact until maturity then you can also considering RBI's savings bonds and senior citizen savings scheme.