Bank change for Fixed Deposit higher interest rate: With recent fixed deposit interest rate hikes announced by several banks, senior citizens can get interest rates as high as 9.6% from one of the banks on term deposits of 5 years.
However, there is a variance in the highest FD rates offered by different banks. For instance, the highest FD rate offered by SBI is just 7.6% whereas many small finance banks are offering more than 9% interest to seniors. In this case, does it make sense for a senior citizen to change their current bank to book FD at a higher interest rate elsewhere?
Experts believe it may not be wise to close an existing FD in a bank for higher interest rates elsewhere, given the penalty for premature closure of FDs and some other conditions that you may have to fullfil to open a term deposit account with a new bank.
According to Adhil Shetty, CEO of BankBazaar.com, a customer can always move to another bank offering higher returns on FD. However, most banks ask customers to open a savings account with them before starting an FD account. So if you move to another bank for a higher interest rate, the new bank’s minimum balance will need you to block some cash in low-returns savings, which will offset the higher returns you expected from the FD.
Moreover, having a new account would also require you to pay various charges and keep track of your statements.
“Your best bets may be wherever you’re already banking,” says Shetty.
Recent Senior Citizen FD rate hikes
RBL Bank announced the ACE Fixed Deposit scheme, which offers an extra 50 bps interest to senior citizens on non-callable deposits above Rs 50 lakh to Rs 2 crore. The highest rate offered by this bank on ACE FDs is 8.75% for super senior citizens and 8.5% for senior citizens.
Ujjivan Small Finance Bank announced 8.75% interest rate for senior citizens on deposits of 1 year and 80 weeks (560 days).
HDFC Bank launched two new FD schemes offering interest rates of 7.70% for a 35-month term and 7.75% for 55-month term deposits for senior citizens.