Senior citizens relieved as bank fixed deposit rates reach 8% after three years

Senior citizens relieved as bank fixed deposit rates reach 8% after three years Senior citizens are seeing returns on fixed deposits of 8% or more for the first time in almost three years, and many are rushing to their banks to review their current FDs. Seniors who depend on interest income for a living have finally found relief as a result of RBI's consecutive rate increases. Rates had fallen to as low as 5.5% at the peak of the pandemic as a result of an excess of liquidity in the banking system, and many people had locked into deposits of 2-3 years in order to profit from a downturn in the market. With some private banks currently offering 8% and public sector banks currently giving over 7.5%, astute seniors are considering premature withdrawals to make new deposits at higher rates. With the assistance of her son, a senior citizen in Mumbai booked an FD of Rs 2.5 lakh in 2020-end for three years at 5.75% in a private bank. The son recently broke the FD and rebooked it after learning that the rate had risen to 7.75% for the same tenure. His mother will receive an additional income of nearly Rs 20,000.

Increased return on senior citizen savings scheme

The government increased the return on the senior citizen savings scheme (SCSS) last month, with rates returning to 8% after falling to 7.4% during the pandemic. However, the disparity between SCSS and bank FDs has narrowed. Some banks offer even higher rates to "super senior citizens," or those over the age of 80. Union Bank of India, for example, offers 75 basis points (100bps=1 percentage point) over its regular rate to super seniors, implying that they can earn 8% on 700-day deposits. The highest return for super senior citizens is 8.1% on 666-day deposits at Punjab National Bank, which is 80 basis points higher than the regular rate. This category of investors receives 25 basis points more from Indian Bank than other senior citizens. Another Mumbai-based retiree repaid an FD he had taken out less than a year before to get a rate nearly two percentage points higher. While these investors claimed they were not penalized, experts said the benefits could vary from case to case. Another thing to keep in mind is that FDs can only be broken online if they are booked through net banking. Depositors who have received physical certificates must go to the bank to make a premature withdrawal. Experts advise depositors to consult with a financial adviser to see if they can benefit from a switch.