
As the elderly population continues to rise, ensuring their financial security is becoming increasingly important. To cater to this growing need, the State Bank of India (SBI) has launched the SBI Patrons Fixed Deposit Scheme, specifically designed for super senior citizens aged 80 and above.
Key Features of the SBI Patrons FD Scheme
The scheme offers an additional 10 basis points (0.10 percent) interest rate above the existing senior citizen rates for super senior citizens. This means that the interest rates for this group range from 4.10 percent to 7.60 percent. According to Amol Joshi, Founder of Plan Rupee Investment Services, the 10-basis points increase is a positive move, but its overall impact is minimal.
The scheme requires a minimum deposit of Rs 1,000, with a maximum deposit limit of Rs 3 crores. The account can be held either singly or jointly, with the condition that the primary account holder in a joint account must be at least 80 years old. The deposit tenure ranges from 7 days to 10 years.
Comparison with Other FD Schemes
SBI also offers other FD schemes that provide slightly higher interest rates for senior citizens, including super senior citizens. For example, the special short-term FD schemes, such as the 444-day Amrit Vrishti (offering a 7.75 percent interest rate) and the 400-day Amrit Kalash (7.60 percent interest rate), provide better returns than the Patrons FD scheme.
Lt Col Rochak Bakshi (retd.), Founder of True North Finance, pointed out that other banks, like Bank of Baroda, offer higher interest rates. Bank of Baroda provides 7.35 percent for a one-year deposit and 7.75 percent for a three-year deposit, while SBI offers 7.1 percent for a one-year deposit and 7.6 percent for a three-year deposit.
Penalty for Premature Withdrawal
One drawback of the SBI Patrons FD scheme is the penalty for premature withdrawal, which is the same as regular deposits. According to Joshi, this may discourage some investors. For deposits up to Rs 5 lakh, SBI reduces the interest rate by 0.50 percent if withdrawn prematurely, and for amounts exceeding Rs 5 lakh, the reduction is 1 percent. Additionally, deposits withdrawn within 7 days will not earn any interest.
In comparison, Bank of Baroda has a more lenient premature withdrawal policy. For deposits up to Rs 5 lakh held for at least 12 months, there is no penalty. For deposits that haven’t met the 12-month minimum or exceed Rs 5 lakh but are less than Rs 1 crore, a 1 percent penalty applies. For large deposits of Rs 1 crore or more, the penalty increases to 1.5 percent.
Maximizing Returns and Liquidity Considerations
Joshi advises super senior citizens to compare the interest rates offered by SBI’s other special tenure FD schemes, which are available until March 31, 2025, and by other banks. This will help them choose the best option for maximizing returns.
Bakshi emphasizes the importance of liquidity for senior citizens, especially in case of medical emergencies. While non-banking finance companies (NBFCs) and small finance banks may offer higher FD rates, they come with increased risks, such as liquidity issues and non-performing assets (NPAs). Therefore, making deposits over Rs 5 lakh in these institutions could be risky.
Final Advice
Joshi also cautions that individuals without an existing SBI account should avoid opening a new one solely for investing in the Patrons FD scheme. While the interest rate is competitive, managing multiple accounts at an advanced age can be burdensome.
In conclusion, while the SBI Patrons Fixed Deposit Scheme offers an attractive option for super senior citizens, it is essential to compare it with other available schemes to ensure the best returns and consider the liquidity and penalty aspects before making a decision.