Bank FD: After the RBI rate cut, the interest on FD is decreasing. This will affect the income of senior citizens. In such a situation, let us know in detail in which schemes senior citizens should invest now.
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has recently cut the repo rate by 25 basis points (bps). This will have a direct impact on fixed deposits (FD), that is, the interest on FD will now decrease. In such a situation, there may be a problem for those senior citizens who depend on them for regular income.
Moving in this direction, Bank of India has announced the closure of its 400-day special FD scheme (on which 7.3% interest was being given) from April 15. It has also cut FD rates for many other periods. At the same time, HDFC Bank has reduced the interest rate on savings account from 3% to 2.75%.
What should senior citizens do now?
Senior citizens still have many investment options. Preeti Zende, founder of Apnadhan Financial Services and a SEBI registered investment advisor, says, ‘Senior citizens should now invest in small savings schemes, as the rates here are currently higher than FDs.’
- Senior Citizen Savings Scheme (SCSS) – 8.2% annual interest (quarterly payment).
- Post Office Monthly Income Scheme (POMIS) – 7.4% annual interest (monthly payment).
- National Savings Certificate (NSC) – 7.7% interest (annually compounded, payment on maturity).
According to Zende, ‘AAA-rated corporate FDs of some companies with excellent track record can also be considered. These can give higher interest than bank FDs and also have the option of monthly payment.’
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Long-term FDs are also a good option
Vishal Dhawan, founder of PlanAhead Financial Planners, says, ‘Now that interest rates are expected to fall further, senior citizens should invest in long-term FDs instead of short-term ones.’
He believes that an interest rate cycle in India usually lasts 2-3 years, and right now we are in that cycle of low interest. That is, interest rates can fall even more in the coming years.
Investing in equity market is also right
Financial advisors believe that despite the current volatility of the market, senior citizens should also invest a part of their portfolio in equity.
Jende says, ‘Do not go directly into stocks, but invest in hybrid mutual funds or balanced advantage funds. They can divert 10-20% of their total capital towards this, if they can take a little risk.’ Dhawan also shares the same opinion and recommends options like large-cap funds and index funds.
No need to panic over the fall in interest rates
Dhawan says that there is no need to panic over the fall in interest rates. The fall in inflation is also the reason behind this policy, and this will also limit the daily expenses of senior citizens.
He says, ‘Instead of panicking or taking hasty decisions, the right way is to rebalance the investment in a planned manner. This will give senior citizens a good value for their investment.’
