As the interest rates of some small savings schemes such as Senior Citizen Savings Scheme, National Savings Certificate, Monthly Income Scheme, Kisan Vikas Patra and time deposits have gone up, individuals can lock-in at higher rates. However, rates of other schemes such as Public Provident Fund and Sukanya Samriddhi Yojana remained unchanged at 7.1% and 7.6%, respectively.
Time deposits
The interest rates offered by small savings on time deposits are higher than bank deposits. While the interest rate of one-year time deposit has been raised from 5.5% to 6.6%, the interest rate of SBI fixed deposit of less than one year is 5.75%. The interest rate of a two-year year post office time deposit has been raised to 6.8% from 5.7%. In contrast, the interest rate of SBI one year to less than two years is 6.75%. For longer tenures, the five-year post office time deposit is now offering 7% as compared with SBI’s 6.25% for five years and up to 10-year fixed deposits.
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Senior Citizen Savings Scheme
Deposits on Senior Citizen Savings Scheme (SCSS) will now fetch 8% which is higher by 50-75 basis points offered by banks to senior citizens. Ideally, senior citizens can lock into this scheme now to earn higher returns. An individual of 60 years or more can open the account. Also, those above 55 years but below 60 years who have retired on superannuation or under VRS can open an account. However, they have to keep in mind that the account will have to be opened within one month of receipt of retirement benefits and the deposit should not exceed the amount received after retirement.
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The lock-in period is for five years and can be extended only once for three years. The minimum and maximum amount of investment is Rs 1,000 and Rs 15 lakh respectively. Interest is paid every quarter. Any number of accounts can be opened subject to maximum investment limit by adding balance in all accounts. Joint account can be opened with a spouse only and the first depositor in the joint account is the investor.