There is a bonanza for senior citizens who love to invest in fixed deposits. Private and public sector banks have lined up interest rates up to 8 per cent on three-year FDs for senior citizens, data compiled by BankBazaar shows. The elders should invest a part of their savings in fixed deposits, which offer liquidity and ensure interest income periodically. The savings are useful to build an emergency corpus. Although bank FD interest is taxable, a lower tax slab for most senior citizens ensures that tax liability is minimal or nil if other income is negligible.
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According to the Reserve Bank of India's financial year 2022 data, investors prefer to park their money in leading public sector banks and private banks’ fixed deposits. As per the data, FD investment in leading public sector banks and private banks comprises 76 percent of total bank deposits. This is despite smaller private banks and small finance banks offering higher interest rates to garner newer deposits.
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The key parameter for identifying these banks is the interest rate of the top 20 banks (according to their total term deposit position reported with the RBI as on March 31, 2022). Data as on respective banks' website on Oct 20, 2023. Banks for which data was not available on their websites have not been considered. The data includes 3-year deposit of senior citizens (60-80 years) for an amount below Rs 1 crore. The value is calculated on the basis of quarterly compounding of interest. Minimum investment amount may vary depending on the type of term deposits account.
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YES Bank and IndusInd Bank offers 8 percent interest on three-year FDs for senior citizens. Among private banks, it offers the best interest rates. A sum of Rs 1 lakh invested grows to Rs 1.27 lakh in three years.
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Bank of Baroda offers 7.75 percent interest on three-year FDs for senior citizens. Among public sector banks, it offers the best interest rates. A sum of Rs 1 lakh invested grows to Rs 1.26 lakh in three years.
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Axis Bank offers 7.60 percent interest on three-year FDs for senior citizens. A sum of Rs 1 lakh invested grows to Rs 1.25 lakh in three years.
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HDFC Bank, ICICI Bank and Punjab National Bank offers 7.50 percent interest on three-year FDs for senior citizens. A sum of Rs 1 lakh invested grows to Rs 1.25 lakh in three years.
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Canara Bank offers 7.30 percent interest on three-year FDs for senior citizens. A sum of Rs 1 lakh invested grows to Rs 1.24 lakh in three years.
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Bank of India offers 7.25 percent interest on three-year FDs for senior citizens. A sum of Rs 1 lakh invested grows to Rs 1.24 lakh in three years.
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Federal Bank offers 7.10 percent interest on three-year FDs for senior citizens. A sum of Rs 1 lakh invested grows to Rs 1.24 lakh in three years.
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The Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the RBI, guarantees investments in fixed deposits of up to Rs 5 lakh.
Hiral Thanawala is a personal finance journalist with 9 years of reporting experience. Based in Mumbai, he covers financial planning, banking and fintech segments from personal finance team for Moneycontrol.
