In the absence of regular earnings to compensate any losses, capital protection is the foremost important thing for senior citizens while investing.
In the absence of regular earnings to compensate any losses, capital protection is the foremost important thing for senior citizens while investing. As a result, despite inflation and tax inefficiency, elderly people predominantly invest in fixed deposits (FDs).
Not only by senior citizens, but FDs are one of the most preferred investment avenues in India due to fixed interest rate for the investment tenure and guaranteed maturity value, which makes the capital free of investment risks.
Moreover, an investor need not open a demat account or fulfill some stringent guidelines to invest in FDs, which makes the investment process easy for people.
The interest rates on FDs that banks and financial institutions offer, depend on the state of economy and vary closely with the rate of inflation as the Reserve Bank of India (RBI) monitors the policy rates to keep the inflation in check.
When inflation is high, the central bank also hikes reserve rates to make lower amount of currency available in the economy, which also results into lower demand and helps reduce the rate of inflation. When the inflation level is low, the RBI reduces the policy rates to enhance money circulation to hike demand and boost the economic activities.
For some years now, the inflation is at a single digit level, which allows the RBI to keep the policy rates at a lower level, which in turn pushes the lending (interest on loans) as well as borrowing (interest on FDs) rates down.
However, the lower rates make senior citizens worried, as they depend on risk-free deposits to protect their hard-earned retirement corpus and get regular interests to meet their expenses.
But the good news for senior citizens as well as risk-averse investors is that Jana Small Finance Bank is now offering higher interest rate of 9.6 per cent for senior citizens on 3-year FDs, while the rate for citizens below 60 years of age is 9 per cent on 3-year FD and 9.25 per cent on 3-year FD Plus. To avail the extra interest of FD Plus, however, one has to invest Rs 15 lakh or more and that too without the option of premature withdrawals.
In comparison to FD rates of big scheduled commercial banks that vary from 3.5 per cent to 7 per cent, the overall FD rates of Jana Small Finance Bank vary from 6 per cent to over 9 per cent. So, getting interest rate close to 10 per cent – precisely 9.6 per cent – is a great relief for the elderly persons.
The following table shows the tenure-wise regular and senior citizen FD rates of Jana Small Finance Bank: