The State Bank of India (SBI), announced a special fixed deposit plan for senior citizens called ‘SBI WECARE’ senior fixed deposit plan.
The bank said that the plan has been launched, aiming to provide higher interest rates for the elderly in the current decline in interest rates because such investors usually rely on interest income. As the Reserve Bank of India (RBI) lowered the repo rate and reverse repo rate, several banks lowered the interest rates on fixed deposits and savings bank accounts, so the program was launched.
The main features of this newly launched program are as follows:
Who can invest?
Only resident senior citizens who are over 60 years old are eligible to invest in this plan. The plan is a domestic fixed deposit, so NRI seniors are not eligible.
What is the interest rate applicable to the plan?
The interest rate of SBI fixed deposit for the general public’s five-year fixed deposit is 5.40%. For senior citizens who invest under a special fixed deposit plan, the applicable interest rate is 6.20%.
What is the term of the FDs under this plan?
According to this special plan, the investment period of time deposits is at least 5 years, and the maximum is 10 years.
How to invest in the plan?
You can invest by visiting SBI bank branches. Existing customers of SBI can also place FDs through online banking.
How will the interest be paid according to the plan?
Interest on fixed deposits under this plan can be paid monthly or quarterly.
SBI has not yet clarified whether investors can choose the cumulative option of fixed deposit interest. Generally, under cumulative options, the interest on the time deposit is paid together with the principal at maturity.
Remember, the interest credited to the investor’s bank account will be deducted from the tax deducted by the bank. For senior citizens, if the total interest in a fiscal year exceeds 50,000 rupees, TDS will be deducted. For the purpose of TDS, the total amount of interest earned on all fixed deposits, fixed deposits or any other deposits held in banks will be considered. The interest deposited into a savings bank account is not subject to TDS.
Loan against fixed deposits
According to the SBI website, in emergency situations, senior citizens can obtain loans from fixed deposits.
Early withdrawal of FD for the plan
If the fixed deposits under the plan are withdrawn in advance, the additional interest which is 30 basis points will not be payable. Therefore, if you choose to withdraw fixed deposits in advance, your fixed deposit investment will only be 0.50% higher than the interest rate applicable to the general public, i.e., 6.20%.
Should you invest in the scheme?
If senior citizens are looking for a reasonable return and the safety of the principal, there are other options that offer higher interest rates compared to SBI’s special FD.
For example, the Senior Citizen Savings Plan (SCSS) currently provides 7.4% per year. The interest rate difference between SBI FD and SCSS is 0.90%. SCSS also allows premature withdrawal, albeit with a certain fine. The term of the SCSS plan is also five years.
According to SCSS rules, if the plan account is closed before 1 year, there is no need to pay any interest, and if it has been paid, it can be recovered. If the account is closed after one year, an amount equal to 1.5% of the deposit amount will be deducted. Similarly, if the plan account is closed after 2 years, 1% will be deducted from the deposit. The maximum amount that can be deposited into the plan is Rs 15 Lakh.
Interest rates for different plans available to seniors
Other post office plans, such as 5 year post office fixed deposit, currently offer an interest rate of 6.7%, and the annual interest rate of the post office monthly income plan account is 6.6%, which is slightly higher than the interest rate of SBI senior FD.
Another option is Pradhan Mantri Vaya Vandana Yojana (PMVVY).The plan provides a period of 7.4% for a period of 10 years. This is a pension-based plan in which investments are made according to the amount and frequency of pensions that investors hope to receive. Pension income can be collected monthly, quarterly, half-yearly and yearly.
Therefore, before making any investment, seniors should evaluate all functions of the plan, not just interest rates.
