Fixed Deposits: Higher Interest Rates Raise Gains for Senior Citizens

With fixed deposit (FD) rates in many small finance and major banks going a notch higher, in some cases more than 9.5%, this is the ideal time for senior citizens to reap benefits of maximum gains. 

Also, there is a possibility that the rates are likely to go a bit higher in case the Reserve Bank of India (RBI) raises the repo rate again in the future. Considering these factors, this remains an apt opportunity for senior citizens and regular customers to book FDs and make the most of higher rates. 

In the fixed-income investment space, FDs tend to offer guaranteed returns and are regarded as relatively safe considering other market-linked products.  Besides, FDs are an effective method of protecting emergency funds from market volatility while acting as a hedge against inflation.

An investor should, however, be aware about certain conditions before investing in FDs. For instance, only about Rs 5 lakh is guaranteed as per the rules of RBI’s Deposit Insurance and Credit Guarantee Corporation (DICGC). Which means, in case of a particular bank faces any issues, an investor’s deposits of about Rs 5 lakh in a bank would be regarded as secure.

This Rs 5 lakh limit remains inclusive of interest and the principal amount. Any bank that faces an issue is mandated to return back the money to depositors within three months or 90 days. 

A senior citizen or regular investor should be aware of this condition and try and invest a particular amount in a bank in which case the sum principal and interest are not higher than Rs 5 lakh. As a safer bet, an individual can look forward to depositing more amounts in various FD accounts in multiple banks. This way they can make the most of higher interest rates in the long run.