Senior Citizen FD Interest Rates: What Investors Need To Know

Senior Citizen FD Interest Rates: What Investors Need To Know

The FD interest rates for senior citizens may vary depending on the issuer’s policies, the tenor chosen, and the invested amount.

FPJ Web DeskUpdated: Tuesday, May 14, 2024, 12:00 PM IST
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Due to the guaranteed returns they offer, fixed deposits (FDs) have always been a favoured investment option in India, especially for senior citizens. The FD interest rates for senior citizens may vary depending on the issuer’s policies, the tenor chosen, and the invested amount. 

However, most banks and NBFCs offer marginally higher interest rates to those above 60 years. This boosts the returns and makes a fixed deposit an even more attractive investment option. 

These are FDs issued by banks and NBFCs specifically designed for those over 60 years. While senior citizens can get higher interest rates of up to 0.50% than regular FDs, super senior citizens can earn even higher returns.

Moreover, if an investor opts for a fixed deposit that provides regular interest payouts, they can also generate a steady income for their retirement years. 

As per the Income Tax Act, 1961, investors can also claim certain tax exemptions on interest earned from their FD investment. Under Section 80C, tax-saver FDs are eligible for tax deductions of up to ₹1.5 Lakhs in a financial year. However, keep in mind that these FDs come with a lock-in period of 5 years. 

The incremental FD interest rates for senior citizens can range between 0.25% p.a. and 0.50% p.a. Opting for FD schemes specifically designed for senior citizens can help individuals earn higher returns. 

However, the overall returns will also depend on several other factors, including the investment duration and the amount invested. Here are the FD interest rates for senior citizens offered by some banks and NBFCs:

Bank/NBFC

Interest Rates for Senior Citizen FDs:

Bajaj Finance

7.65% - 8.85%

PNB Housing Finance

7.30% - 8.15%

Mahindra Finance

8.00% - 8.30%

Punjab National Bank

4.30% - 8.05%

AU Small Finance Bank

5.47% - 8.44%

Ujjivan Small Finance Bank

4.25% - 9.00%

YES Bank

3.75% - 8.25%

HDFC Bank

3.50% - 7.75%

Axis Bank

3.50% - 7.85%

IDFC Bank

3.50% - 8.25%

RBL Bank

4.00% - 8.60%

Disclaimer: The FD interest rates provided in the table above may change subject to changes in the issuer’s policies. Check the latest FD rates before applying for a scheme.

The increased FD interest rates for senior citizens can significantly boost their returns. However, certain key factors influence the interest rates for fixed deposits. These include the following:

Issuer’s Policies

The interest rates may differ based on the issuer selected. While Public Sector Banks (PSBs) offer lower rates, they are considered safer for investments. The Deposit Insurance and Credit Guarantee Corporation insures FDs for up to ₹5 Lakhs per depositor per bank. 

However, some private banks and Non-banking Finance Companies (NBFCs) may offer higher interest rates. Investors can choose an issuer offering the best rates, enabling them to maximise their earnings.

Deposit Tenor

Banks and NBFCs offer different rates for FDs with varying tenors. The interest will generally increase if investors choose an FD with a longer duration. As deposits with longer tenor options provide issuers with a longer timeframe to utilise the funds, they tend to offer higher returns. 

Deposit Amount

Some issuers also offer different interest rates based on the amount deposited in the FD account. For instance, FD issuers may offer slightly higher interest rates on deposits exceeding a certain amount.

Special Schemes

To expand social security, FD issuers may offer higher benefits and special offers for senior citizens. The prevalent government policies may affect these schemes and one’s overall FD returns.  

Inflation

When inflation is higher, issuers tend to offer higher interest rates on investment products like fixed deposits. Investors can consider opening an FD account when RBI announces a hike in repo rates.

By understanding the factors that influence FD interest rates, investors can make informed decisions and plan effectively for retirement years. As bank deposits are secured by the DICGC, these are considered low-risk investments and provide peace of mind.

Moreover, senior citizens can also opt for a fixed deposit that offers monthly, quarterly, semi-annual,  or annual interest payouts. This may provide them with a predictable source of income to meet their regular expenses.

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