Banks have reduced FD rates over the past few months with the Reserve Bank of India cutting policy rates to support the covid-19-hit economy.
PPF’s interest rate has been held at 7.1%. Post office term deposit rates continue to be 5.5% for deposits of one to three years and 6.7% for five years. In contrast, the State Bank of India revised its FD rates downwards on 27 May. SBI FD rates now range from 2.9% (for deposits of seven to 45 days) to 5.4% (for deposits of five to 10 years) for deposits less than ₹2 crore. Even large private sector banks like HDFC Bank offer fairly similar rates to SBI.
The National Savings Certificate (NSC), which has a tenor of five years, is particularly competitive against five-year bank FD rates. NSC’s rate has been held at 6.8%.
The highest rate among small savings scheme is being given by the Sukanya Samriddhi Yojana (SSY)—7.6%. However, SSY is only available to the parents of a girl child below the age of 10.
Some small savings schemes like SCSS are only available to senior citizens. SCSS has a term of five years which can be extended by three years. It has a maximum investment limit of ₹15 lakh per individual. However, its rate is substantially higher than bank FD rates for senior citizens. For example, the highest SBI rate for senior citizens is 6.20%, lower than the 7.4% on SCSS.
“Currently, small savings schemes are attractive for conservative investors depending on their time horizon. Short-term investors can consider overnight, liquid and high-quality ultra short-duration funds for better liquidity," said Rushabh Desai, a Mumbai-based financial planner.