As the Reserve Bank of India raised its repo rate in February, banks are offering attractive fixed deposit rates, which are seen as safer in the current volatile market situation. This has sparked a comparison with the interest rates on small savings schemes like Kisan Vikas Patra, which the Centre has claimed are better than bank fixed deposit schemes.
Kisan Vikas Patra is one of the popular small savings schemes offered by the Post Office, and the interest rate is revised by the Union Government on a quarterly basis. For January-March 2023, the Centre is offering an interest rate of 7.2 per cent, which means any investment in a KVP account will double in 10 years. The lock-in period for Kisan Vikas Patra is 2 years and 6 months, and the minimum deposit for a KVP account is Rs 1,000, with no maximum investment limit. Children above the age of 10 years can also open a KVP account.
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On the other hand, all major banks, including State Bank of India (SBI), HDFC Bank, Punjab National Bank (PNB), ICICI Bank, Kotak Mahindra Bank, and Axis Bank, have revised their interest rates for fixed deposits. Nationalised banks offer a return of up to 7.5-8 per cent on fixed deposits, while small finance banks (SFBs) offer up to 9.5 per cent.
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SBI is offering 7.5 per cent interest to senior citizens for a period of 10 years, while PNB is offering 7.3 per cent for a similar scheme. HDFC Bank has a special scheme called Senior Citizen Care FD, where the rate of interest is 7.75 per cent for a period of 10 years, and ICICI Bank has a dedicated fixed deposit scheme for senior citizens, called Golden Years FD, where the interest rate is 7.50 per cent for tenors of 10 years.
Calculating the returns from these schemes, an investment of Rs 100,000 in SBI for a period of 10 years can earn an investor more than Rs 2.10 lakh, while the same amount in PNB can earn an investor Rs 2.14 lakh. HDFC Bank’s Senior Citizen Care FD can give a return of Rs 2.15 lakh, and ICICI Bank’s Golden Years FD can earn Rs 2.1 lakh for an investment of Rs 1 lakh at 7.5 per cent rate for 10 years.
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It is important to note that while bank FD interest is taxable, senior citizens receive additional benefits that help minimize tax liability. This is why bank fixed deposit schemes have emerged as a safer option for investors, as their returns are not linked to market-linked schemes.
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While small savings schemes like Kisan Vikas Patra have their advantages, bank fixed deposit schemes offer a safer investment option in the current market situation. The attractive interest rates offered by major banks for senior citizens have made bank FDs a popular choice for investors looking for stable returns over the long term.
