Interest up to 8.75% on Senior Citizen FD: New interest rates of private, government and small finance banks

Fixed Deposit (FD) has always been the most reliable source of regular and secure income for retired employees and senior citizens above 60 years of age. From Small Finance Banks (SFBs) to big private and government banks, they have made their interest rates quite attractive for the elderly who want safe returns in the festive quarter. Select small finance banks are offering annual interest ranging from 8.50% to 8.75% to senior citizens on special tenures, while large government and private banks are offering interest ranging from 7.00% to 8.15%. Banks provide additional interest (Premium Interest) of 0.50% to 0.75% to senior citizens compared to normal customers. If you are also thinking of investing your hard-earned money in fixed deposits, then before investing money in the bank, definitely see the complete comparison of the latest interest rates of small finance, private and government banks.

Small finance banks are leading in terms of interest rates. These banks are offering the highest interest rates on long and medium term to attract deposits. ESAF Small Finance Bank and Suryoday Small Finance Bank are offering the highest rates ranging from 8.50% to 8.75% to senior citizens on select tenures. Similarly, Jana Small Finance Bank is offering 8.30% interest on 3 year FD, Unity Bank is offering more than 8.00% interest and Ujjivan Small Finance Bank is offering up to 8.30% interest. Senior citizens should note that these top rates are not applicable for all tenures, but only for specific periods of 2 years to 5 years.

Big and medium private banks of the country are also offering attractive interest rates to senior citizens. In the private sector, SBM Bank India is offering the highest rate of 8.15%. Apart from this, DCB Bank is offering 8.00% interest on 5 year tenure, Bandhan Bank 7.95% interest, IndusInd Bank and Yes Bank are offering 7.75% interest on 3 year FD. If we talk about the country’s largest private lenders – HDFC Bank, ICICI Bank and Kotak Mahindra Bank, then here senior citizens are getting safe interest rates of 6.75% to 7.15% on FDs of 1 year to 5 years.

For senior citizens who prefer complete security of their principal and government guarantee, Public Sector Banks (PSU Banks) are the safest option. Among government banks, Bank of India leads with a rate of 7.45% on a tenure of 3 years. Punjab and Sindh Bank is offering interest up to 7.35% and Bank of Baroda 7.25%. The country’s largest public sector bank, State Bank of India (SBI) offers up to 7.05% interest on 5-year FD to senior citizens and up to 7.15% interest under ‘SBI We-Care’ and Super Senior Citizen (above 80 years) schemes. Whereas Punjab National Bank (PNB) is giving returns ranging from 7.10% to 7.25% on the special scheme of 444 days.

Often this question arises in the minds of the elderly whether it is safe to invest money in a small finance bank due to the lure of higher interest or not. According to the rules of the Reserve Bank of India (RBI), all the scheduled commercial banks, private banks and small finance banks of the country come under the insurance protection cover of DICGC (Deposit Insurance and Credit Guarantee Corporation), a full subsidiary of RBI. This means that the total amount deposited in any one bank up to ₹ 5 lakh per account holder (principal + interest combined) is 100% legally safe and insured. If a senior citizen has a retirement capital of ₹15 lakh or ₹20 lakh, they can get maximum interest and complete security together by creating FDs of ₹4.5 to ₹5 lakh in 3 to 4 different banks instead of putting the entire money in a single bank.

It is very important for senior citizens to be aware of the income tax rules regarding interest received on FD. Under Section 80TTB of the Income Tax Act, citizens above 60 years of age get direct tax exemption on the total interest received from bank and post office FD or savings account up to ₹ 50,000 in a financial year. If your total interest in a financial year exceeds ₹50,000, banks deduct TDS at the rate of 10%. If your total annual income is less than the tax exemption limit and no tax liability is incurred, you can submit Form 15H to the bank at the beginning of the financial year itself, so that the bank will not deduct TDS on interest payments. Apart from this, the elderly who want interest for monthly expenses can choose the monthly pay-out option, while for compound benefits, the maturity (cumulative) option proves to be the best.