At present, most banks and non-bank entities offer investors fixed deposit options with a maximum tenure of 10 years, but now this will change. Suryoday Small Finance Bank is reportedly looking at introducing fixed deposits with a maximum tenure of up to 20 years.

“Currently, banks offer FDs for up to 10 years. We are working on a longer tenor FD,” said R Baskar Babu, MD & CEO, Suryoday SFB.

Elaborating on this FD plan, he said “the product is at the trying stage. We are looking at the interest rate risk.”

Under this fixed deposit plan, there will be an option of systematic withdrawal plan from 11th year onwards, Babu informed. This new offering, as reported by Hindu Business Line, will function similarly to an annuity plan provided by life insurance companies but will be available for a limited duration.

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Interest rate to be benchmarked

It is expected that the interest rate for this new FD product might be linked to the widely traded 10-year benchmark government security, according to experts.

Currently, State Bank of India (SBI) offers an annuity deposit scheme with tenures of three, five, seven, or ten years. Under SBI’s scheme, customers deposit a lump sum amount and receive monthly annuity payments consisting of both principal and interest.

Suryoday Small Finance Bank’s upcoming annuity deposit scheme will differ significantly from SBI’s. Instead of a single lump-sum deposit, Suryoday’s scheme will involve recurring monthly deposits during the first half of the deposit period. In the second half, depositors will receive monthly payments from the bank, functioning as reverse equated monthly installments (EMIs).

Currently, fixed deposits come in various tenures, categorized into short-term, medium-term, and long-term. Long-term fixed deposits typically span from over 5 years to 10 years. Generally, banks offer deposit tenures ranging from as short as 7 days to up to 10 years. While longer durations may attract higher interest rates, these rates can vary between banks. In India, the maximum duration for standard long-term deposits is 10 years.

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What is a long-term fixed deposit?

A long-term fixed deposit is a type of deposit account where the investor invests for more than 5 years or even 10 years or beyond.