Fixed deposits (FDs) are often the preferred instruments for senior citizens. FDs provide some extra benefits to the elderly such as a higher interest rate and tax benefits.
Unlike market-linked products such as mutual funds, where you do not know the returns you will earn over a period of time, you can be fairly certain about the returns from an FD. Most banks offer a 50 basis points (bps) higher interest rate on deposits made by senior citizens.
Senior citizens can invest in a FD for a tenure ranging from 7 days to 10 years. There is a facility of premature withdrawal of FD. However, a penalty can be levied by the bank on premature withdrawal, and the amount of penalty varies across banks.
Banks, nowadays, offer the facility of automatic renewals at the time of maturity. Auto renewal of FD is for the same period for which it was initially placed at the interest rate prevailing on the date of auto-renewal.
Let’s take a look at the FD interest rate offered by RBL, Bandhan, IDFC First, Lakshmi Vilas and AU Small Finance Bank to senior citizens for a tenure of one year:
RBL Bank offers a special interest rate on FD for senior citizens. Current RBL Bank FD rates for senior citizens range from 5.50% to 8.25%. RBL Bank gives 8.20% interest for deposits maturing in 12 months to less than 24 months. These interest rates are applicable from 13th August.
Senior citizens get an additional 75 basis points over the slab rates for regular customers. FD rates in Bandhan Bank for senior citizens range from 4.25% to 8.10%, depending upon the tenure chosen. Bandhan Bank has revised FD interest rates with effect from 16th September. Bandhan Bank gives 8.00% interest for deposits maturing in 1 year to 18 months. Bandhan Bank gives 25 basis points extra on term deposits to senior citizens as compared to other banks.
IDFC First Bank
IDFC First Bank gives interest ranging from 4.50% to 8.50% on deposits maturing in 1 year to 10 years to senior citizens. These rates are with effect from 21 August. The bank gives 8.50% interest on FDs maturing in 1 year and 1 year, 1 day to 2 years.
AU Small Finance Bank
AU Small Finance Bank offers interest ranging from 6% to 8.60% on deposits maturing in 7 days to 10 years. For deposits maturing in 12 months 1 day to 15 months, AU Small Finance gives 8.27% interest to senior citizens.
Lakshmi Vilas Bank
Lakshmi Vilas Bank offers interest ranging from 4.50% to 8.20% to senior citizens. For deposits maturing in one year to less than five years, Lakshmi Vilas Bank gives 8.10% interest.