Senior citizens apparently do not have any reason to cheer for Prime Minister Narendra Modi's announcement on the eve of the new year. In a much-awaited, televised address on December 31, 2016, that has already been described as some sort of Budget speech, Modi said senior citizens would benefit from a new deposit scheme that will offer 8 percent interest for 10 years.
"Under the scheme, senior citizens will receive a fixed interest rate of 8 per cent for a period of 10 years, on deposits up to 7.5 lakh rupees. The interest will be paid monthly," he said.
There does not seem to be much of a gain for senior citizens if one were to compare interest rates on deposits of similar or even shorter tenure offered currently.
Here is a quick comparison of how the scheme fares against some similar, existing schemes.
Post office scheme
The post office scheme offers 8.50 interest rate under the Senior Citizen Saving Scheme or SCSS.
"From 1.10.2016, interest rates are as follows:- 8.5% per annum, payable from the date of deposit of 31st March/30th Sept/31st December in the first instance & thereafter, interest shall be payable on 31st March, 30th June, 30th Sept and 31st December," according to information available on the website of indiapost.gov.in.
The SCSS is available for individuals above the age of 60 years and also to those below that (55 to 60 years) under certain circumstances; the maximum amount that can be deposited is Rs 15 lakh. The deposits have a maturity period of five years, with an option to renew for another three years.
"An individual of the age of 55 years or more but less than 60 years who has retired on superannuation or under VRS can also open account subject to the condition that the account is opened within one month of receipt of retirement benefits and amount should not exceed the amount of retirement benefits," according to the website.
State Bank of India
The country's largest bank revised its interest rates on fixed deposits within days of demonetisation, keeping in mind the surge in remittances by people who wanted to get rid of the banned notes at the earliest. The new rates came into effect on November 17, 2016.
For senior citizens, State Bank of India (SBI) left the interest rates unchanged at 7 percent for deposits with a maturity in two categories: 3 years to less than 5 years, and 5 years to up to 10 years.
Interestingly, a deposit for 2 years to less than 3 years fetches 7.35 percent, down from 7.50 percent till November 16, 2016.
India's largest private sector lender also offers interest rates that are comparable to the latest offer by the prime minister in his December 31 speech.
ICICI Bank offers 7 percent on deposits held in the "5 years 1 day up to 10 years" in the normal course. In another scheme where the maximum amount deposited is Rs 1.50 lakh, the bank offers 7.25 percent for five years, with riders.
"The maximum aggregate amount that can be invested in the Tax Saver FD (80C FD) under a single PAN is Rs 150,000 and the same cannot be closed prematurely before the expiry of the lock-in period of 5 years."
If you are a senior citizen who has retired from the bank, you can get 1 percent more.
The revised rates are effective from December 28, 2016.
A hidden message?
There could be a hidden message behind the announcement by Modi. Interest rates on small savings could be headed for a downward revision in the context of falling yields on government securities and bank deposits. If it happens, it could be a risky surgical strike, since it would have the potential to politically harm the BJP's prospects in poll-bound states — Uttar Pradesh, Goa, Punjab and Uttarakhand.
State Bank of India interest rates
Revision in Interest Rates On Retail Domestic Term Deposits (below Rs 1 crore) effective November 17, 2016. Accordingly, the interest rates for Retail Domestic Term Deposits 'below Rs 1 crore' have been revised. The revised interest rates are as under:
(All figures in % per annum)
|Tenors||Existing for Public w.e.f. 24.10.2016||Revised For Public w.e.f. 17.11.2016||Existing for Senior Citizens w.e.f. 24.10.2016||Revised for Senior Citizens w.e.f. 17.11.2016|
|7 days to 45 days||5.50||5.50||6.00||6.00|
|46 days to 179 days||6.50||6.50||7.00||7.00|
|180 days to 210 days||6.75||6.75||7.25||7.25|
|211 days to less than 1 year||7.00||7.00||7.50||7.50|
|1 year to 455 days||7.05||6.90||7.55||7.40|
|456 days to less than 2 years||7.10||6.95||7.60||7.45|
|2 years to less than 3 years||7.00||6.85||7.50||7.35|
|3 years to less than 5 years||6.50||6.50||7.00||7.00|
|5 years and up to 10 years||6.50||6.50||7.00||7.00|
ICICI Bank interest rates on domestic, NRO & NRE deposits(Less than Rs 1 crore)
|Tenure Period||Rate of Interest (% p.a.) w.e.f December 28, 2016|
|7 days to 14 days||4.00||4.50|
|15 days to 29 days||4.25||4.75|
|30 days to 45 days||5.50||6.00|
|46 days to 60 days||5.75||6.25|
|61 days to 90 days||6.25||6.75|
|91 days to 120 days||6.25||6.75|
|121 days to 184 days||6.25||6.75|
|185 days to 289 days||6.25||6.75|
|290 days to less than 1 year||6.50||7.00|
|1 year to 389 days||6.90||7.40|
|390 days to 2 years||7.00||7.50|
|2 years 1 day upto 5 years||6.75||7.25|
|5 years 1 day upto 10 years||6.50||7.00|
|5 Years Tax saver FD(Max upto Rs. 1.50 lac)||6.75||7.25|
*Senior Citizen rates applicable only for domestic term deposit.