State Bank of India (SBI) has revised its fixed deposit (FD) rates effective from January 15, 2022. Most of the revisions are in deposits of above Rs 2 crore. However, for deposit amounts of below Rs 2 crore, there is a change in only one tenor. SBI offers eight tenors in all (which range from 7 days-45 days to 5 years-10 years) to all depositors, including senior citizens. The rates of interest shall be applicable on fresh deposits and renewals of maturing deposits.
For Amounts Less Than Rs 2 Crore
If you deposit money and choose the period of one year to less than two years, you will get an additional 0.1 per cent (or 10 basis points; one basis point is one-hundredth of a percentage). The rate has been increased from 5.0 per cent to 5.1 per cent.
Senior citizens can also avail the benefit as the rates are the same tenor (1 year to < 2 years) has been increased from 5.5 per cent to 5.6 per cent.
The bank also has a special product for senior citizens in the five years and above tenor that gives an additional premium of 30 basis points. As of now, according to the bank’s website, the deposit scheme is available till March 31, 2022.
For Amounts More Than Rs 2 Crore
The rates have been increased by 0.1 per cent across all eight tenors available, for senior citizens as well. The interest rates available now are 3 per cent and 3.1 per cent. For senior citizens it is 3.5 per cent and 3.6 per cent.
Non-Resident Ordinary (NRO) deposits will also be aligned to these domestic retail term deposit rates, the bank’s website states.
Should You Invest?
Look at your need and decide accordingly. Interest earned from FDs is taxable. The interest is added to your income and gets taxed as per the slab rates applicable. If the interest earned is more than Rs 40,000 (Rs 50,000 for seniors), tax is deducted at source for individuals.
In recent years, FDs have lost a lot of sheen because they offer low interest rates that don’t beat inflation. Plus, they are taxed at income tax rates. However, FDs offer capital protection and are easy to operate. They may be a good first step for young investors such as students or first-time employees. “FDs are a good starting point as they help build the habit of saving. For others, FDs offer capital protection,” says Melvin Joseph, managing partner, Finvin Financial Planners.
FDs have other uses too: they are also suitable if you are not in the taxable bracket; need a place to park returns if the financial goal is near or while you rebalance your overall portfolio; and as a part of emergency funds thanks to the flexibility of quick and premature withdrawals.