Fixed deposits (FDs) are term deposits kept with banks for a fixed period like six months, one year, or two years, among others. They offer higher interest rates as compared with savings deposits, and FD is comparable with other investment instruments. Interest on FD is also taxable.
The average bank FD rate across PNB, SBI, HDFC Bank and ICICI Bank for 6 months is 5 per cent but the post-tax return works out to be only 3.49 per cent, according to the FundsIndia’s Wealth Conversation Report May 2023. Similarly, for deposits of 5-year tenure in these banks, the average interest rate is around 6.75 per cent but the post-tax return works out to be only 4.9 per cent.
For FDs of 3-year tenure, the average interest rate is 6.88 per cent while the post-tax return is just 4.91 per cent. Similarly, for FDs of 2-year tenure in these four banks, the average rate is 6.98 per cent but the post-tax return works out to be online 4.93 per cent, according to an FE report.
India’s largest lender State Bank of India (SBI) recently reintroduced its retail term deposit, Amrit Kalash, which will offer an interest rate of 7.6 per cent to senior citizens and 7.1 per cent to others. It is a special FD scheme for a period of 400 days.
The bank reinstated the scheme on April 12 and is valid till June 30. The scheme is only applicable to domestic retail term deposits including NRI Rupee Term Deposits below Rs 2 crore. Earlier, SBI launched the same scheme for a shorter tenure on February 15, this year and was valid till March 31.
According to the SBI website, “The specific tenor scheme of ‘400 days’ (Amrit Kalash) at a rate of interest of 7.10 per cent with effect from (w.e.f.) April 12, 2023. Senior Citizens are eligible for a rate of interest of 7.60 per cent."
The interest on this trading scheme will be deposited monthly, quarterly and semi-annual intervals. The maturity interest on special term deposits, net of tax deducted at source (TDS) will be added to the customer’s account.