How To Make The Most of Special FD Schemes of SBI, HDFC, & ICICI Bank?

Fixed deposits (FDs) are among the most widely used financial instruments on the market for investors with conservative risk profiles to earn a regular flow of income. In order to entice elderly individuals to make deposits that come with odd tenures and limited time periods to deal with, several of the top banks have started offering special FD programmes to them. These banks provide senior citizens higher interest rates above and above the regular rates.

On 12- April- 2023, India's largest lender State Bank of India (SBI) special scheme '400 days" (Amrit Kalash)' with a 7.10 % standard rate and 7.60% for senior citizens. The Scheme will be valid till 30-June-2023 according to SBI.

On the other hand, HDFC Bank on 29th May 2023 announced that "Enjoy HIGHER FD Rates @7.20% on tenure 35 months and @7.25% on tenure 55 months. What's more? Senior Citizen benefits 0.50% EXTRA!...So Hurry! Valid for Limited Period only!". Senior Citizens who seek to book a Fixed Deposit less than 5 crores for a period of 5 (five) years One Day to 10 Years during the special deposit offer running from May 18 to July 7 will receive an additional premium of 0.25% over and above the current Premium of 0.50%. Senior Citizens who book new Fixed Deposits or renew existing ones within the aforementioned time are eligible for this special incentive. Indian non-residents are not eligible for this deal.

On 06.03.2023, Indian Bank launched "IND SUPER 400 DAYS" special FD scheme and it is valid till 30.06.2023. This FD offers 7.25% return for the general public, 7.75% for senior citizens and 8.00% for super senior citizens. Golden Years FDs from ICICI Bank with terms ranging from 5 years, 1 day, to 10 years were introduced on December 16, 2022. Residents who are senior citizens will get an additional interest rate on an FD under this programme of 0.10% over and above the current additional rate of 0.50% per year. Senior residents will receive an interest rate on the ICICI Bank Golden Years FD of 7.50%, which is 60 basis points higher than the standard rate of 6.90%.

Bharath Rathore, Executive Director, Anand Rathi Wealth Limited said "The best debt options for senior citizens are FDs and Debt MFs. FDs which have maturity period of more than 1 year senior citizen can reap an interest of 7.0-7.75% in which HDFC bank provides highest interest rate of 7.75% for a period of more than 5 years. Other alternative to FD is debt MF under which we have TMF which invests in the government. papers. For senior citizens, a combination of debt and equity of 70:30 will serve a better purpose as this will simultaneously help them beat inflation as well."

Santosh Navlani, COO of ET Money, said on how senior citizens can benefit from special FD schemes "Many banks offer special FDs for senior citizens that offer higher interest rates than those applicable on general FDs. On a five-year deposit, senior citizens can earn about 7.5% interest on such FDs. Do note that the interest from FDs is added to income and taxed as per the applicable slabs for senior citizens. However, one can claim a tax deduction of interest of up to Rs 50,000 in a financial year.An even better option for senior citizens could be the Senior Citizens Savings Scheme (SCSS).

Currently, its interest rate is 8.2%. Its limit has also been raised from Rs 15 lakh to Rs 30 lakh from this financial year for a solo subscriber. For a joint subscriber, the limit is Rs 60 lakh. SCSS has a lock-in of five years and hence is akin to a five-year FD. The prevailing rates at the time of the lock-in apply for the entire tenure. Like FDs, the interest is added to your income and taxed as per the applicable slabs. Plus, you can claim the Rs 50,000 tax deduction as well.It's also important that senior citizens, who are likely to be retired, also have about a fourth to a third of their corpus in equity to get inflation-adjusted returns. Relying solely on fixed income in retirement is not advisable as it can result in the retirement corpus falling short due to the effect of inflation."

Aashika Jain, financial expert and editor at Forbes Advisor said "The special fixed deposits of banks like SBI, HDFC and ICICI offer a higher interest rate on investments by senior citizens when compared with other citizens. These FDs can be lucrative as senior citizens can maximize their savings by investing in a manner that the total interest income from fixed deposits stay within the exemption limit of INR 50,000 per financial year under Section 80TTB. Diversifying investments across multiple special FDs can provide near tax-free returns."

Aniruddha Bose, Chief Business Officer, FinEdge said "With the tax arbitrage on debt funds being done away with, special FD's for Senior Citizens such as SBI's WECARE, HDFC's Senior Citizen Care and ICICI's Golden Years FD are definitely viable options for retirees. They offer a very high degree of safety due to the bank's pedigree and creditworthiness, and rates that are typically around 50 bps higher than the regular FD's.

However, it is advisable for senior citizens to not lock away all their funds into low risk/low return investments such as these special FD's, because the risk of outliving our savings is very real today due to the steady increase in lifespans over the past few years. Even retirees will need to take a measured degree of risk in order to ensure that they strike an optimal balance between capital preservation and capital growth. The support and guidance of a qualified financial planner can be invaluable at this life stage, as seemingly small mistakes could end up having huge ramifications on your finances."

Commenting on how senior citizens can make the most of special FD scheme of the above discussed banks, Pamarty Venkataramana ( PVR ) is an international corporate lawyer from New Delhi,lndia said "Senior citizens often consider investing in special fixed deposits offered by banks like SBI, HDFC, and ICICI to secure their savings and generate income during retirement.

These banks, along with many others, offer specific fixed deposit schemes tailored to meet the needs of senior citizens. There are some factors to consider when deciding whether to invest in these special fixed deposits. Fixed deposits generally have a fixed tenure during which the funds are locked in. However, senior citizens may have specific requirements for liquidity or the need for periodic income. Some fixed deposit schemes offer flexibility in terms of premature withdrawals or interest payouts at regular intervals. It's important to understand the terms and conditions associated with the fixed deposit scheme to ensure it aligns with the specific needs of senior citizens."

"The interest earned on fixed deposits is taxable as per the income tax laws of the respective countries. In some countries, senior citizens may enjoy additional tax benefits or exemptions on their fixed deposit interest. It's advisable to consult a tax professional or refer to the tax laws of the specific country to understand the tax implications and any applicable deductions or exemptions. Banks like SBI, HDFC, and ICICI are well-established and renowned financial institutions, which enhances the safety and reliability of their fixed deposit schemes. They have a strong track record and are regulated by the respective banking authorities in their respective countries. This provides a level of assurance for senior citizens who prioritize the safety of their investments," said Pamarty Venkataramana.

"Ultimately, the decision to invest in special fixed deposits should be based on an individual's financial goals, risk tolerance, liquidity requirements, and the prevailing interest rates. It's recommended to carefully evaluate the terms and conditions of the fixed deposit schemes offered by these banks and compare them with other available options before making an investment decision," Pamarty Venkataramana further added.