Benefits of Fixed Deposit for young and old age persons

Fixed deposits are secured savings investments made in the form of a one-time deposit into a dedicated account. Individuals and companies both use the investment vehicle, but, senior citizens enjoy a higher rate of interest in comparison to others. The highest fixed deposit interest rates for senior citizens could be 8%. 

FD Eligibility & Fixed Deposits

All citizens apply for a fixed deposit account must be at least 60 years of age. The age restriction is applicable for both Indian and NRI investors. NRI senior citizens need to open the fixed deposit under non-resident category (NRO) or the non-resident external category (NRE). 

Features of Fixed Deposit for Senior Citizens

The features of traditional fixed deposits are quite similar to the senior citizens fixed deposits. Let’s take a quick review:

  • The senior citizens fixed deposit tenures are quite flexible, falling in the range of 5 to 10 years. The exact tenure can differ from one financial institution to the other.
  • Senior citizens have the option to nominate in case of death. They can choose a friend, family member or business colleague. The nominee is to receive the specific amount in case of the death of the depositor.
  • One of the major differentiators between the senior citizens fixed deposits and FDs is the interest rates. Seniors are offered higher rates of interest than the traditional fixed deposit schemes, but these schemes are time and amount specific. Longer tenure means the depositor will get a higher interest even in the fixed interest rate is not high.
  • The interest of the senior citizen fixed deposit is calculated on a compound rate which means that the maturity value will be more than expected. Some banks offer an additional 0.5% interest on the fixed interest rate to the senior citizens who are residents.

Nonetheless, conditions are applicable, such as the interest rates can change as per the terms and conditions of the lending institution. Some of the special interest rates are not permitted in case of an investment of 1 crore or more.

If we take a moment to go through the recent bank trends, we can figure out that the highest fixed deposit interest rates for senior citizens can be as high as 8%. However, the deposit should be made for ten years, and it cannot exceed the amount of 7.5 lakhs. 

The Risk Factor

Fixed deposits have little or no risk. The interest rate remains constant throughout the tenure, which means that it does not get affected by market volatility. For example, if you have chosen a tenure of three years, at an interest rate of 8.5% per annum. But, after the first year, the lending institution’s rates are revised to 8%. It will not affect the interest rate you will earn for the next two years. It mitigates the risk, making FDs one of the safest investment vehicle.

Maria Fernsby

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