Most senior citizens prefer to stay away from the volatility of the equity and debt markets. They prefer investing in bank fixed deposits (FDs) to earn a regular monthly income after retirement. However, falling bank deposit rates have reduced their monthly income sharply in the last year or so. This is because banks have reduced the interest rates on fixed deposits across tenures after steady repo rate cuts from the Reserve Bank of India (RBI). Interest rates on small-saving schemes too have been cut in recent quarters.
Despite falling interest rates, there are still some banks that offer attractive rates on three-year FDs for senior citizens. Not surprisingly, the smaller private banks tend to top the rate chart on fixed deposits, given the competition they face in garnering deposits.
Higher rates offered by smaller private banks
Smaller private banks offer interest rates of up to 7.45 per cent on three-year FDs for senior citizens, according to data compiled by BankBazaar. These interest rates are higher compared to those offered by public sector banks. For instance, DCB Bank, RBL Bank, IndusInd Bank and others, as shown in the table, offer 6.5-7.45 per cent interest on their three-year FDs. Public sector banks such as Punjab National Bank and Canara Bank offer 6 per cent and 5.85 per cent, respectively. Behemoths such as State Bank of India (SBI) and Bank of Baroda (BOB) offer 5.8 per cent and 5.6 per cent interest, respectively, on their three-year FDs for senior citizens.
Leading private banks such as Axis Bank offer 5.90 per cent interest on three-year FDs. ICICI Bank and HDFC Bank offers 5.85 per cent and 5.65 per cent interest respectively.
Investments in fixed deposits of up to Rs 5 lakh are guaranteed by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the RBI.
The minimum investment amount varies across banks. At private and public banks, the amount ranges from Rs 100 to Rs 10,000.
A note about the tableThe data on FDs is as on October 28, 2020, as given in the respective websites. Interest rates given are for senior citizens aged 60-80 (deposit amount below Rs 1 crore). All listed (BSE) public sector banks and private banks are considered for data compilation. Banks for which verifiable data is not available are not considered. For all FDs, quarterly compounding is assumed.