Last January, Reserve Bank of India released data on the basic statistical return of financial institutions in the year 2018-19. The share of fixed deposits in the whole asset return of financial institutions was at 57.7%, a significant rise compared to that of savings deposits, which stood at 32.9%.
This data shows how fixed deposits form a greater part of the savings of Indians in the current financial conditions. This is especially due to the secured nature of this investment along with its high returns, making it especially suitable as an investment as well as a fund to provide monetary assistance during retirement years. Furthermore, under government norms, these accounts are insured in case the financial institution fails due to some unforeseen reason.
Rates Offered to Senior Citizens on Fixed Deposits
A secured investment where senior citizens can invest anything from Rs.25,000 to Rs.5 crore, senior citizen FD rates are especially higher than those offered to others. Subsequently, it is often advised to invest in fixed deposit accounts especially after retirement to secure the later years of life. While the rates offered to senior citizens are usually higher than standard fixed deposit rates, there are numerous clauses which can raise this interest rate even further.
You will find the rates of interest discussed in detail below. The non-cumulative rates offered on fixed deposits are mentioned in the order of monthly, quarterly, half-yearly and yearly pay-outs.
- For a tenor ranging between 12 and 23 months, the cumulative rate is 7.85%. In the case of non-cumulative investments, the senior citizen FD rates are 7.58%, 7.63%, 7.70% and 7.85% for monthly, quarterly, half-yearly, and annual payouts.
- For tenors in between 24 and 35 months, cumulative rates stand at 8.15%. The non-cumulative rates are 7.86%, 7.91%, 7.99% and 8.15%.
- The longest tenor offered by NBFCs usually stands between 36 and 60 months. For these schemes, the cumulative rate offered is 8.35% and non-cumulative rates for the same tenor, the rates are 8.05%, 8.10%, 8.18%, and 8.35%.
These rates offered by different financial institutions on their fixed deposit accounts are according to the latest circular that is to take effect from the 7th of December, 2019.
Other Schemes for Investments by Senior Citizens.
Fixed deposits are the most convenient and secure investment plans available for senior citizens. This is because such schemes are market independent and assure high yield. Retirees are unlikely to have a source of stable income, which reduces their risk appetite and ability to recover after sustaining a financial loss. Along with fixed deposits, any senior citizen considering what schemes they should invest in to plan their post-retirement life should take note of the following list.
- Senior Citizen Saving Schemes: Another safe investment option that allows senior citizens to invest just after their retirement, SCSS schemes also offer high rates of interest. However, this scheme offers only 5 years of investment tenor. Anyone interested in investing for more than 5 years can only opt to extend the scheme once for a tenor of 3 years. Consequently, it makes this investment policy unsuitable for the longer-term.
- Tax-free bonds: These bonds are issued by the government to raise money for specific enterprises. These have extended tenors ranging between 10 and 30 years. However, they are not preferred as an investment option especially since the rates of interest offered on these bonds are lower than those of senior citizen FD rates. Usually, the investment can go up to Rs.10 lakh.
- Debt funds: Debt funds are a type of mutual fund which primarily focuses on fixed-income investments. Consequently, these are considered as a safe investment option.
While considering different types of investment options, senior citizens should look for the pros and cons of investing in fixed deposits as well as the other schemes. It is essential to consider the risk factor along with the invested returns before deciding on the ideal option for generating higher returns. Additionally, many financial institutions like Bajaj Finance also offer the option to avail of a loan on an existing FD account, making it especially helpful for senior citizens to avail of financial aid in case of emergencies.