Skip to main content

With Fixed Deposits Losing Appeal, Investors Rush to the Post Office

By
A five-year deposit with a post office gives 8.5% returns against only 7-7.75% from a bank FD
The recent cuts in bank FD rates are driving investors to post office instruments. After the rate cuts in early October, a five-year fixed deposit with the country's leading banks fetches 77.75%.
In comparison, a time deposit with the post office for the same duration fetches 8.5%. With 10-year National Savings Certificates (NSC) you get 8.8%.
Financial advisors said expectations of lower returns from post office deposits after the Union Budget in 2016 are prompting investors to lock in a portion of their money in this instrument.
Soon after Reserve Bank of India's 50 basis points repo rate cut in September, the government said it would review the small savings rates in order to facilitate transmission of monetary policy easing.
Banks have complained that higher in terest rates on small savings schemes have made their deposits rates uncompetitive. “I am advising investors to shift from bank deposits to post office time deposits, as and when their deposits come up for maturity,“ said Jitendra Solanki, a New Delhi-based financial planner.
For the last 3-4 years, investors preferred bank deposits as they paid higher rates, as compared to post offices.
But, this is changing now. Financial advisors said the gap in interest rates between banks and post office is wider for senior citizens.
A five-year senior citizen scheme pays 9.3% against SBI's 7.25%. However, there is a cap of Rs.15 lakh on this scheme, though there is no investment cap on term deposits and NSCs.
“Retired investors who do not want the risk of any other asset class other than fixed deposits, are finding post office schemes better, as they can easily earn higher interest rates, with the same amount of safety,“ says Nikhil Naik, managing director of Mumbai-based Naik Wealth Advisors.
Wealth managers said this sharp difference in interest rates between the banks and post offices could be a temporary phenomenon and investors should make the most of it.
Post office schemes have become far more convenient now.
Unlike earlier times, when a term deposit was locked for the first six months, now investors in a term deposit can withdraw anytime and if the deposit is closed before one year, they will earn only a savings bank interest.
Also, in case of monthly income schemes a post office offers ECS (electronic clearing service) facility where investors can get interest credited to their regular bank account.
The Economic Times, New Delhi, 3rd Nov. 2015

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more