As the September 30 deadline for investing in special fixed deposits (FDs) of banks such as State Bank of India (SBI), IDBI and Indian Bank nears, individuals looking for higher returns must lock into these FDs fast. Such schemes are offering interest rates of 7.05-7.35% for 300-444-day tenures and an additional 50 basis points for senior citizens.
For instance, SBI’s Amrit Kalash special FD is offering 7.1% interest on a tenure of 400 days. Senior citizens will get 50 basis points more. In contrast, for regular FDs, it offers 6.8% to the general public and 7.30% to senior citizens for tenure of one year to less than two years. SBI has another special FD scheme —Amrit Vrishti —which is offering 7.25% to the general public and 7.75% to senior citizens for 444-day tenure. The deadline is March 31, 2025.
Similarly, IBDI Bank’s UTSAV special deposits are offering 7.2- 7.35% for tenure ranging between 300 to 700 days. Its IND Super offers 7.25% to the general public with a tenure of 400 days and 7.05% for 300 days.
Attractive rates
Special FDs offer interest rates that are higher than regular fixed deposits to attract deposits. As interest rates are likely to fall, locking money in special deposits with predefined tenures will help depositors align with short- to medium-term financial goals. Adhil Shetty, CEO, Bankbazaar.com, says locking in special FDs at higher rates now can be a good decision. “If rate cuts are anticipated from the RBI, these special FDs could offer rates that may not be available in regular deposits after the schemes close,” he says.
Gaurav Aggarwal, chief business officer, Unsecured Lending, Paisabazaar, says depositors can consider these special FD schemes only if these match their investment horizons as well. “However, they should also check the interest rates of high yield FDs offered by small finance banks before booking the special FD schemes,” he says. In fact, small finance banks such as AU Bank, Suryoday Bank, Unity Bank and Ujjivan Bank are offering FD yields of more than 8% on tenures of 1-2 years.
No premature withdrawal
As special FDs come with specific tenures, these schemes do not allow premature withdrawal. So investors should ensure they won’t need access to these funds before maturity. Depositors must look at their liquidity requirements before investing in special fixed deposit schemes.
Banks introduce special FDs to mobilise funds, often during periods of high credit demand or when banks expect future rate cuts. “Offering attractive short-term rates can help banks shore up deposits. If a depositor locks into these FDs now, she can continue enjoying higher rates even if market rates fall,” says Shetty.
Apart from the repo rate, banks consider the gap between their growth in deposit mobilisation and credit demand while setting their FD rates. “Thus, banks failing to mobilise adequate deposits to meet their credit demand may continue to offer high FD rates or launch special FD schemes,” says Aggarwal.