Seniors frequently choose to invest in safe investments that offer higher returns. The fixed deposit is one of the conventional investment alternatives that older adults trust the most.
Recently, private lenders like SBI, HDFC, ICICI Bank, Bank of Baroda, and Union Bank of India changed their interest rates on fixed deposits in addition to public sector banks. Small Finance Banks (SFBs) give a return of up to 9% on fixed deposits, as opposed to the maximum 7.5% offered by nationalized banks. Ujjivan Small Finance Bank, Utkarsh Small Finance Bank, Jana Small Finance Bank, and Fincare Small Finance Bank are some of these SFBs.
Are your investments safe if you're a senior citizen?
The safety of your deposits is not guaranteed with any banks, as we have seen in the past when the RBI ordered the closure of numerous financial institutions, even though tiny financing banks give a higher return. Banks give decent returns on fixed deposits under Rs 2 crore, but what if a bank is closed down or declares bankruptcy? What would happen to your initial investment in that scenario?
What is the DICGC rule regarding senior citizen fixed deposits?
The Reserve Bank of India (RBI) has established guidelines for the Deposit Insurance and Credit Guarantee Corporation (DICGC) that limit the amount of insured deposits to only Rs 5 lakh. It's important to note that the Rs. 5 lakh restriction covers both principal and interest payments. This means that even if a financial institution has a larger deposit than this limit, depositors will only receive up to Rs 5 lakh back in the event of bankruptcy or closure. Banks have 90 days to repay the money to depositors.
What does the RBI say about senior citizen fixed deposits?
"Each depositor in a bank is insured up to a maximum of Rs 5,00,000 (Rupees five lakhs) for both principal and interest amount held by him in the same right and same capacity as on the date of liquidation/cancellation of bank's license or the date on which the scheme of amalgamation/merger/reconstruction comes into force," the RBI stated on its website.
Investor advice for senior citizen fixed deposits
Fixed deposits are thought to be risk-free, but experts claim that the only risk is the possibility of a bank failure. Even though the likelihood of a bank being closed is low, one should investigate the reputation of the financial organization before investing. You should not be seduced by high interest rates if you believe that the bank's financial situation is precarious or if there is any reason to question the bank's longevity.
Fixed Deposit for Seniors: Investment safety measures
According to experts, you should only invest an amount that doesn't exceed Rs 5 lakh, including principal and interest gained, with a bank whose longevity you are uncertain about. Make an effort to have several fixed deposits if you want to invest additional money. Alternative investment opportunities include the Public Provident Fund (PPF), National Pension System, Senior Citizen Savings Scheme (SCSS), and National Savings Certificate (NPS).