These Special Fixed Deposit Schemes Ending In September: Should You Invest?

For senior citizens who are looking to get higher returns in the form of regular income against their deposits, investing in two special fixed deposit schemes before September 2021, can be beneficial. At present, leading banks of India such as Bank of Baroda and HDFC Bank are offering special deposit schemes for senior citizens where this special offer will be valid till 30th September 2021. Let's now discuss the special fixed deposit scheme of the above said banks and make a conclusion on whether to invest or not.

HDFC Bank Senior Citizen Care FD

For senior citizens, HDFC Bank offers a Senior Citizen Care Fixed Deposit scheme, under which they will receive an additional rate of 0.25 percent over and above the existing 0.50 percent premium on fixed deposits of less than 5 crores if made for 5 years 1 day to 10 Years during the offer period ending in 30th September 2021.

This offer is valid for new as well renewal deposits made by resident senior citizens only. The interest rate will be 1.00 percent less than the contracted rate or the base rate applicable for the term of the deposit maintained with the bank, whichever is lower, if a fixed or term deposit made in the ongoing offer is prematurely closed, including sweep in or partial closure, on or before 5 years.

If a term deposit registered in the ongoing offer is prematurely closed (including sweep in / partial closure) after 5 years, the interest rate will be 1.25 percent lower than the contracted rate or the base rate applicable for the duration of the deposit maintained with the bank, whichever is lower. Here are the most recent interest rates on fixed deposits of HDFC Bank for senior citizens which they should look at. 

Tenor Bucket	Senior Citizen Rates (p.a.)
7 - 14 days	3.00%
15 - 29 days	3.00%
30 - 45 days	3.50%
46 - 60 days	3.50%
61 - 90 days	3.50%
91 days - 6 months	4.00%
6 mnths 1 days - 9 mnths	4.90%
9 mnths 1 day < 1 Year	4.90%
1 Year	5.40%
1 year 1 day - 2 years	5.40%
2 years 1 day - 3 years	5.65%
3 year 1 day- 5 years	5.80%
5 years 1 day - 10 years	6.25%
Source: Bank Website, Applicable from 21st May,2021

Bank of Baroda Special Fixed Deposit Scheme

On the other hand, Bank of Baroda (BoB) also allows Domestic & NRO Term Deposits including fresh and renewals for both regular and senior citizens. But for senior citizens, the bank promises an additional rate of 0.50% on deposits of less than Rs 2 Cr maturing in 5 years. But under the special fixed deposit scheme, BoB offers an additional rate of 1.00% on deposits maturing in above 5 years to up to 10 years. This special offer is valid till 30.09.2021, according to the bank. For a deposit amount of less than Rs 2 Cr, below are the latest interest rates on fixed deposits for senior citizens of Bank of Baroda.

Tenors	Senior Citizen Rates (p.a.)
7 days to 14 days	3.30%
15 days to 45 days	3.30%
46 days to 90 days	4.20%
91 days to 180 days	4.20%
181 days to 270 days	4.80%
271 days & above and less than 1 year	4.90%
1 year	5.40%
Above 1 year to 400 days	5.50%
Above 400 days and upto 2 Years	5.50%
Above 2 Years and upto 3 Years	5.60%
Above 3 Years and upto 5 Years	5.75%
Above 5 Years and upto 10 Years	6.25%
Source: Bank Website, (w.e.f. 16.11.2020)

Our take

Now we've arrived at the point where we'd advise older citizens to avoid the two special fixed deposit schemes mentioned above. My opinion is that they should avoid interest rate risk by not investing in special fixed deposit schemes with terms of more than 5 years. The above-mentioned deposit schemes' special rates will only apply if they maintain their deposits for more than 5 years and up to 10 years, which is a lock-in term.

If the Reserve Bank of India (RBI) hikes repo rates in response to rising inflation, banks will also raise their fixed deposit rates consequently. As a result, investors should keep an eye on the rate of inflation and invest in the short term rather than keeping their deposits locked in for long term. As a substitute to the special FD schemes, senior citizens can invest in Senior Citizens Savings Scheme (SCSS) which comes with a pretty good interest rate of 7.40% with the same maturity period of 5 years.

They can also invest in Pradhan Mantri Vaya Vandana Yojana (PMVVY) to get a regular flow of income in the form of pension with an interest rate of 7.10%. Senior citizens can also invest in fixed deposit schemes of government-owned companies where they can get an assured return of 8.50% much higher than SCSS, PMVVY, and special fixed deposit schemes resulting in inflation-beating by a higher rate.