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Senior Citizen Fixed Deposits with Interest Rates Above 8%

Bank fixed deposit is one of the most popular investment avenues opted by senior citizens in India. Read this article to know the prevailing interest rates offered on senior citizen fixed deposit and the various reasons why they make for an attractive financial instrument.

Senior Citizen Fixed Deposit Interest rate

Fixed deposit is one of the most common financial instruments for senior citizens to invest money. Most senior citizens prefer to invest a large amount of their corpus in bank FDs as the principal amount is considered safer as compared to equity-linked investment avenues and it offers guaranteed returns in the form of interest income.

Interest rates offered on senior citizen fixed deposit scheme

Fixed deposits for senior citizens are the same as regular fixed deposits. The points of difference are – a) senior citizen fixed deposit has some limitations with regards to their term and b) offers better interest rates. Senior citizen fixed deposit scheme can act as an additional source of income for retired individuals, if appropriately managed.

Generally, banks offer 0.5% higher interest rates on senior citizen fixed deposit as compared to people in general. Senior citizens can choose if they wish to receive interest income in the form of regular payouts to meet their day-to-day expenses or at the time of FD maturity along with the principal amount.

Senior citizen fixed deposit rates as on October 2019.

Tenure: 1 year

Bank NameInterest Rate Compounded QuarterlyWhat Rs. 10,000 will grow to
IDFC First Bank8.50%Rs. 10,877
Lakshmi Vilas Bank8.10%Rs. 10,835
RBL Bank8.10%Rs. 10,835
Bandhan Bank8.00%Rs. 10,824
IndusInd Bank7.75%Rs. 10,798

Tenure: 2 year

Bank NameInterest Rate Compounded QuarterlyWhat Rs. 10,000 will grow to
IDFC First Bank8.50%Rs. 11,832
Lakshmi Vilas Bank8.10%Rs. 11,751
RBL Bank8.15%Rs. 11,751
Bandhan Bank8.15%Rs. 11,740
DCB Bank8.00%Rs. 11,717

Tenure: 3 years

Bank NameInterest Rate Compounded QuarterlyWhat Rs. 10,000 will grow to
IDFC First Bank8.00%Rs. 12,682
Lakshmi Vilas Bank8.10%Rs. 12,720
AU Small Finance Bank8.27%Rs. 12,878
Bandhan Bank8.10%Rs. 12,720
DCB Bank8.50%Rs. 12,870

Tenure: 5 years

Bank NameInterest Rate Compounded QuarterlyWhat Rs. 10,000 will grow to
IDFC First Bank8.00%Rs. 14,859
AU Small Finance Bank8.00%Rs. 14,859
RBL Bank8.00%Rs. 14,859
Bandhan Bank8.00%Rs. 10,824
DCB Bank8.25%Rs. 15,043

Note: These interest rates are subject to change as per the bank’s discretion. One must check the prevailing interest rates before making an investment decision.

Let’s understand why investing in senior citizen fixed deposit is an attractive investment proposition for senior citizens in India. Unlike market-linked investment options, fixed deposit still remains the top choice as its investors are certain that this investment tool will keep their money secure and offer fairly good returns. Following are some of the reasons why a fixed deposit is the preferred choice of investors, especially for senior citizens.

  • Fixed returns: FDs offer fixed returns. Unlike equity shares and other market-related investment options, where the amount of return is uncertain, FD account holders can be sure about the profits they will be earning on their principal amount.

  • Flexible payouts: As we know, FDs earn interest at pre-decided interest rates. Investors can receive interest income on fixed deposit as per their choice. FDs offer flexibility to investors to choose the payout method. It can be received on yearly, half-yearly, quarterly, monthly, or on the date of maturity. Hence, senior citizen investors can choose the payment frequency as per their financial needs when they do not have a regular income from employment source. Moreover, investors can choose how they would like to receive the interest income, i.e. by ECS or Cheque. This gives FD investors the flexibility to receive the interest earned as per their convenience and financial plans.

  • Higher interest rate: The most significant advantage offered by banks and NBFCs is the higher interest rates on senior citizen fixed deposit. Most of the financial institutions in the country offer a minimum of 0.25% to 0.50% higher rate of interest to senior citizen depositors.

  • Ease of transaction: This is another reason for the popularity of FDs among senior citizen investors. They usually do not want the hassle of transactions frequently, and they prefer less documentation. Keeping in mind these parameters, banks and NBFCs have made the entire process of investing money in FD quick, simple and hassle-free.

  • Tax benefit: According to the newly added Section 80TTB in the Income Tax Act, 1961, interest amount earned up to Rs. 50,000 on deposits held with banks or post offices are exempted from the tax. Hence, a senior citizen investor can claim a tax deduction of up to Rs. 50,000 income earned from fixed deposits in a financial year.

Eligibility criteria to open a senior citizen fixed deposit account

Senior citizen fixed deposit scheme can be availed only by senior citizens as they offer higher interest rates. To invest in senior citizen fixed deposit scheme, investors are required to submit their proof of age to avail the benefits provided on FDs. Following is an overview of the eligibility criteria to invest in senior citizen fixed deposit account and some of the best features offered by FDs.

  • Age of the investor must be 60 years (completed) or more.
  • Investors are required to submit an age proof to invest money in senior citizen fixed deposit scheme.
  • Investors can choose the FD term according to their financial need and investment goal. Most banks and NBFCs offer FD terms ranging between 7 days to 10 years.
  • Senior citizen investors earn a higher interest rate as compared to regular deposits. Most banks offer 0.25% to 0.50% higher interest rate to senior citizens investing in FDs.
  • Senior citizens can avail the benefit of loan and overdraft facility offered by banks.
  • The premature withdrawals will attract penalties similar to a regular deposit.

Fixed deposit is one of the greatest investment tools that have little or no risk. They are designed in such a way that they bring financial relief to investors, especially senior citizens. Even though the fixed deposit is a safe and secure investment option, it is wise to carry extensive research of all available senior citizen fixed deposit schemes in the market and then invest your money. Happy Investing!

Recommended Read: Secure Your Retirement with Fixed Deposit