Banks Hike FD Rates for Senior Citizens – Is it Time to Invest?

Banks have increased fixed deposit rates for senior citizens following the Reserve Bank of India’s (RBI) increase in interest rates.

The RBI has constantly been increasing interest rates for the last few months to fight inflation. While the interest rates for loans have increased, which has affected people’s borrowing decisions, there has also been an increase in the deposit rates.

Whether it’s the savings bank account interest rate or the bank fixed deposit interest rate, there is an increase in the earnings of the depositors. Many senior citizens consider fixed deposits as their investment avenue because of the fixed returns and market security. However, is it the right time to invest in FDs for senior citizens after the increase in the bank’s FD rates? Let us understand.

Current Interest Rates for Senior Citizens

The current fixed deposit interest rates in banks for senior citizens are anywhere between 3.5% and 8.3%, depending upon the tenure of the deposit you choose to make in our bank. This is after an increase in the repo rates by the Reserve Bank of India (RBI) over the last few months.

Hike in interest rates for senior citizens

The Reserve Bank of India (RBI) has increased the interest rates thrice since May 2022, when it raised the rates by 40 basis points (bps). The next hike came in June 2022 when RBI raised the repo rate by 50 bps. In August 2022, RBI raised the repo rate by another 50 bps to 7.50%.

Since then, there have been two more hikes in September and December 2022, bringing the benchmark interest rate to 8%. Therefore, the interest rates have increased by 1.90% in the past five months.

Types of Fixed Deposit Accounts

Among the most common types of fixed deposits are:

Cumulative fixed deposit

The Reserve Bank of India has issued directives that interest on term deposits will be calculated at quarterly compounding intervals and paid at the rate decided by the Bank depending upon the period of deposits. In this scheme, the depositor gets benefit to earn interest on both principal and interest components. Our bank has fixed deposit schemes in the name of Baroda Regular Income cum Recurring Deposit (Cumulative Fixed Deposit).

Non-cumulative fixed deposit

Interest on our Non-cumulative fixed deposit is paid to the depositor at regular intervals. This ensures a passive income for the depositor. Our bank offers Non -cumulative fixed deposit in the name of -Baroda Regular Income PLAN – MONTHLY INCOME PLAN, Baroda Regular Income PLAN –QUARTELY INCOME PLAN.

Tax Savings Fixed Deposit :

RBL Bank offers Tax Savings Fixed Deposit, which come with a lock-in period of five years. They are eligible for deductions under Section 80C of the Income Tax Act, 1961. The maximum amount of deduction that can be claimed is up to Rs. 1, 50,000 /- per annum as per Income tax guidelines.

Flexi Fixed Deposit

Flexi Fixed Deposit (FFD) is a special type of deposit that provides the facility to sweep out balances above a certain threshold. This sweep out account is fixed for a period of time, and any amount above this threshold is swept into the FFD. The balance in the savings or current account can fall below the stipulated balance requirement to clear debits in the operative account at any time, but only up to the amount of money that has been swept out from it.

Should Senior Citizens Consider Opening Fixed Deposits with Bank of Baroda for Higher Rates?

Senior citizens can consider opening fixed deposits with Bank of Baroda for higher rates. For senior citizens, the security of their capital is important, and they therefore prefer senior citizen fixed deposits. Interest rates for senior citizen fixed deposits usually range anywhere around 0.5% additional to those offered to general public. Currently maximum rate of interest for senior citizens is 7.5%.

Opening fixed deposits with Bank of Baroda will not only allow you to secure your investments but also earn a higher return on your investments.

Advise to Investors

Senior citizens are more risk-averse, and therefore, they prefer to invest in fixed deposits. The Bank of Baroda offers senior citizens a great opportunity to invest securely and earn good returns on their investments.

If you are a senior citizen considering opening a fixed deposit, then you should consider the Bank of Baroda. If you want to calculate your returns, you can use the FD calculator and earn lucrative returns on your investments.