Where interest rates on term deposits are higher than PPF, NSC, KVP?

Is 'SBI Sarvottam' scheme a better option for senior citizens? Is this scheme getting closed in June 2023?

- Koneru Venkata Sireesh, Nellore

You are confused between 'SBI Sarvottam' and 'SBI WECARE'. Both schemes are different. SBI launched 'SBI Sarvottam' (Non-Callable) Term Deposit for all investors. SBI' Sarvottam' (Non-Callable) Term Deposit offers a higher interest rate without a premature withdrawal facility.

'SBI Sarvottam' offers a higher interest rate than Public Provident Fund (PPF), National Savings Certificate (NSC), and Post Office deposit schemes. This scheme is for resident individuals and non-individual customers. Though the SBI Sarvottam interest rate is higher than the PPF scheme, NSC and Kisan Vikas Patra (KVP), the tax benefits offered by the PPF and NSC make them attractive.

On the other hand, KVP doesn't come under the 80C deductions. Thus, the returns are completely taxable. The PPF and NSC are far better than the 'SBI Sarvottam' scheme regarding liquidity and tax benefits. The term deposits are only available for one year and two years. Resident individuals and non-individual customers are eligible to open deposits under SBI Sarvottam term deposits.

However, this scheme does not accept deposits from resident minors and Non-Resident Indians (NRIs). The minimum amount of the deposit is multiples of Rs 1,000 thereafter. The maximum amount is Rs 2 crore for retail depositors. 'SBI Sarvottam' allows bulk deposits under the scheme and the deposits can be between Rs 2 crore and Rs 5 crore.

Senior citizens and SBI employees are eligible for additional interest rate over the applicable non-callable deposit Rate for the Public. However, NRI Senior Citizens and NRI SBI employees are not eligible to apply. There is no option for Renewal of the deposit under the scheme. The 'SBI Sarvottam' (Non-Callable) Term Deposit Scheme does not allow premature withdrawal. But one can avail Demand Loan against deposits under this scheme subject to the applicable margin. It does not allow premature withdrawals, hence the suffix 'Non-Callable'. Usually, banks offer higher interest rates on deposits where there is no premature withdrawal facility (non-callable feature) and lower interests on deposits with premature withdrawal (callable feature).

Under the SBI 'Sarvottam' scheme, the State Bank of India offers up to 7.4 per cent for term deposits between Rs 15 lakh and Rs 2 crore for two years, and for a one-year tenure, the rate is fixed at 7.10 per cent. Senior citizens under SBI' Sarvottam' scheme will earn 50 basis points extra, which makes it 7.6 per cent for deposits maturing in one year. The interest rate is 7.9 per cent for deposits maturing in two years. The Annualised Yield for senior citizens for a two-year deposit of above Rs 15 lakh to Rs 2 crore is 8.14 per cent, and 7.82 per cent for a one-year Sarvottam deposit of above Rs 15 lakh to Rs 2 crore.

The State Bank of India launched 'SBI WeCare' Senior Citizens Term Deposit Scheme in May 2020. The purpose is to protect Senior Citizens' income by providing additional interest on their term deposits. This means Senior Citizens under this scheme will earn an additional premium of 30 bps, over and above the existing premium of 50 bps (80 bps over the card rate for the public). The deposit period is a minimum of 5 years and a maximum of 10 years.

The scheme comes with monthly, quarterly, and at-maturity - payment of interest options. Those who withdraw the 'SBI WeCare' deposit before maturity or break the fixed deposit before the completion of its tenure will not be entitled to the additional interest under the scheme. Once the senior citizens create a deposit under the 'SBI WeCare' scheme, they can renew it, provided SBI does not withdraw the scheme. Senior citizens either open a fresh deposit under the 'SBI WeCare' e scheme or convert their maturing deposits upon renewal.

The 'SBI WeCare' term deposit plan was initially launched on 12 May 2020 and the scheme's end date was September 2020. Since the launch of the ''SBI WeCare', the scheme has been extended multiple times. Initially, the 'SBI WeCare' deposit scheme's deadline for senior citizens was 31 December 2020. Later it was extended to 30 June 2021 and 30 September 2021. The scheme was extended further to 30 September 2022 and then to 31 March 2023. Finally, SBI extended the deadline for the 'SBI WeCare' FD scheme for senior citizens to 30 June 2023.