Safe FD choices for seniors

With the market perched precariously high, investing in stocks or market-linked products may not really be worth the anxiety for those well past their prime and into their 60s. Here, safety of the hard earned money takes top priority.

Investing in bank deposits is a better way to safeguard investors’ money while at the same time earning a reasonable interest rate.

In fact, if you are a senior citizen, you can get about 50 basis points higher than the regular rates in banks and 25 bps higher in non-banking financial institutions (NBFCs).

At the moment, the ideal period for deposits seems to be up to two years. Interest rates are at a near-bottom now, and may begin to look up sooner than later.

Hence, it will be a good idea to lock-in for a short term and reinvest at a better rate on maturity.

RBL Bank offers among the most attractive rates for up to two years. In this bank, across the 181-240 days and 241-364 days bracket, the rates offered are 7.62 per cent and 7.98 per cent respectively. Canara Bank and ICICI Bank also have offerings for roughly the same time periods, but the rates are lower.

If you want to deposit for exactly one year, RBL bank offers 8.24 per cent. YES Bank and Canara Bank follow with 7.82 per cent and 7.61 per cent respectively for a year.

You can gain marginally from the special rates offered by some banks such as YES Bank if you have a one to two-year horizon. YES Bank offers 7.87 per cent rate for deposits in the 18 months 8 days to 18 months 18 days category. This is higher than their one and two-year rates.

If you can wait a year longer, the interest rate moves higher. RBL Bank’s 8.40 per cent rate for a two-year horizon is currently the highest across tenures, across several public and private sector banks. Again, for a two-year tenure, YES Bank comes second with a 7.82 per cent and Canara Bank third with 7.78 per cent.

Typically, if you are prepared to take some risk, non-banking finance companies offer better interest rates than banks for the same time periods. To keep risk to the minimum, deposits with AAA or highest safety rating are recommended.

Among AAA- rated NBFCs, Bajaj Finance offers the highest one-year deposit rate at 8.05 per cent, closely followed by DHFL and Shriram Transport finance, both offering 8 per cent for the one-year period.

However, the rates offered are lower than RBL Bank, but higher than other banks such as YES Bank and Canara Bank. For a period of two years, Bajaj Finance offers 8.25 per cent, again lower than RBL Bank but higher than other banks’ offerings.

Interestingly, at 8.3 per cent, Bajaj Finance offers about six basis points better than RBL Bank when it comes to three-year deposits.

Similarly, Shriram Transport Finance offers 8.25 per cent for three-year deposits. Note that the minimum deposit for Shriram Transport Finance and Bajaj Finance are ₹10,000 and ₹25,000 respectively.

Finally, keep in mind that these are rates for cumulative deposits. Interest rates for deposits with regular payout options may vary. Also,these rates may not prevail if you decide to pre-close your deposit before maturity. You may have to forego a part of the promised interest as penalty.