Category: Investment and Saving

They say precaution is better than cure. And it doesn't just apply to health, but also personal finances. Only those people have relief in the lockdown who have savings in their bank accounts. To promote the same behavior, SBI has come with a new savings scheme. In this scheme, customers will have to deposit as minimum as Rs 100 per month, and they will get huge interest rates in returns.

What Exactly Is The Scheme?

The scheme comes under a specific type of bank account that is called RD or Recurring Deposit. In the RD scheme, one has to keep depositing a specific sum of money regularly for a specific period of time. Once that time completes, the customer gets a huge return on his deposits.

The biggest advantage of RD schemes is that they give higher interests than standard savings accounts.

Deposit From Home

If you want to take benefits from this scheme in SBI, the biggest perk is that all procedures - from opening an account to money deposits - can be done sitting at your home. All you have to do is just install the YONO SBI app on your smartphone.

Step By Step Procedure

1.      Log in into your SBI account in YONO app

2.     Click on 'Deposits'

3.    Click on 'Create Recurring Deposits'

4.    Fill the money that you want to deposit per month in your RD account

5.    Choose the bank account in which you want to deposit the money

6.    Choose the time period for which want to deposit the money

7.     Choose the monthly date on which you will deposit the money in your account

8.    Click on 'View interest rates' to know RD interest rates

9.    You will see different interest rates for different maturity periods

10. Choose the maturity period that suits your interests

Account Nominee

Another good thing about RD accounts is that you can also choose nominee, just like you do in a standard savings account. After completing the aforementioned steps, you will be taken on the page where you will have to choose your RD account nominee. Once you choose the nominee, your RD account will be opened, and the necessary details will be sent to your email id.

Features of RD Account

The minimum amount that you can deposit monthly in RD accounts is Rs 100. There is no maximum bar. In this scheme, you can open an RD account for a minimum of one year and a maximum of 10 years. You can also take a loan of 90% of your deposited money.

Right now, SBI is giving interest rates of 2.9% to 5.4% for different maturity periods. Seniors Citizens will get an extra interest of 0.5%.

To get more tips and insights on banking and savings, keep reading BankingOnTips.

When it comes to small savings schemes, India Post's Sukanya Samriddhi Yojana is the best in terms of returns. In the Sukanya Samriddhi Yojana, the depositor will get a yearly interest rate of 7.6%. This interest rate is way more than that of FD, NSC, Monthly Income Scheme, KVP, or RD schemes.

In other words, if you want to invest peanuts and get loads of money after some time, Sukanya Samriddhi Yojana is the way to go.

In Sukanya Samriddhi Yojana (SSY), a person has to deposit at least 250 rupees monthly while the maximum deposit limit is 1.5 lakh rupees.

Because the scheme is availed by India Post, your money will be secure in the hands of the government. Not only that, there is also a 100% guarantee of returns. Because the India Post comes directly under the central government, this guarantee is given by the central government itself.

In this scheme, once your interest gets locked, you will get the return accordingly. The parents will have to invest the sum for a period of 14 years, while the maturity period of the scheme is 21 years. The remaining 7 years will get a yearly interest rate of 7.6 % on the closing balance of the first 14 years.

Rs. 15 Lakh Return On Deposit Of Rs. 9 Lakh

For current quarters, the interest rate of SSY is set at 7.6%. Suppose the interest remains the same, and you deposit Rs. 3,000 monthly or Rs. 36,000 yearly for 14 consecutive years. At a compound interest rate of 7.6 percent, this sum will amount to Rs. 9,11,574.

After the completion of the first 14 years, the compound interest rate will turn into a yearly interest rate. For the next 7 years, a yearly interest rate of 7.6% will apply to these Rs. 9,11,574. After the maturity period of 21 years, you will get a return of Rs. 15,22,221.

How Much Profit Can You Make

You can deposit a maximum of 12,500 rupees monthly or 1.5 lakh rupees yearly. You will have to keep depositing the same amount for the next 14 years. As per your compound interest, this sum will amount to 37,98,225 rupees. After another 7 years of yearly 7.6% interest rate, you will get a return of 63,42,589 rupees.

Earlier, the minimum monthly deposit sum was set to 1,000 rupees, but it has been reduced to 250 rupees monthly only. Not only can you earn money by high-interest rates, but you will also save your hard-earned income in terms of taxes. According to Act 80C of Income Tax Rules, the money you will deposit in SSY will be exempted from tax.

To get more tips and insights on banking and savings, keep reading BankingOnTips.

The State Bank of India has again changed the fixed deposit interest rates by 40 basis points. The bank made the announcement through their official website, stating that the changes will be effective from May 27. This is the second time in May that SBI has made the cuts in FD rates.

As per the financial pundits, this decision will impact those depositors who were planning to renew their FDs in the coming months. Now, the one-year SBI FD rate stands at 5.10 per cent. This is lower than before. Earlier, the one-year SBI FD rate of interest was at 5.50 per cent.

New FD rates For General Public:

·     7 days to 45 days - 2.9%

·     46 days to 179 days - 3.9%

·     180 days to 210 days - 4.4%

·     211 days to less than 1 year - 4.4%

·     1 year to less than 2 years - 5.1%

·     2 years to less than 3 years - 5.1%

·     3 years to less than 5 years - 5.3%

·     5 years and up to 10 years - 5.4%

New FD Rates For Senior Citizens

Amidst the changes, only senior citizens are getting some benefits. SBI has introduced a special “SBI Wecare” Deposit for Senior Citizens. The step was taken to protect senior citizens in the tough time.

As per the new scheme, an additional 30bps premium will be available for the senior citizen’s Retail term deposits with “5 Years and above” tenor only. However, this will remain in effect only up to September 30, 2020.

Here are the FD rates for senior citizens:

·     7 days to 45 days - 3.4%

·     46 days to 179 days - 4.4%

·     180 days to 210 days - 4.9%

·     211 days to less than 1 year - 4.9%

·     1 year to less than 2 years - 5.6%

·     2 years to less than 3 years -5.6%

·     3 years to less than 5 years - 5.8%

·     5 years and up to 10 years - 6.2%

The Takeaway

Earlier on May 12, SBI had cut the interest rates on term deposits of up to 3 years tenor by 20bps. The bank had also slashed the interest rates on FD twice in the month of March.

With RBI cutting the repo rates, it is expected that the conditions might go sour. The bank fundings are also falling and this may lead to further decrease in the interest rates on fixed deposits raising concerns among people.

For more such updates and news, keep reading BankingOnTips.

Just a week ago, the State Bank of India (SBI) announced a special fixed deposit (FD) scheme for senior citizens. The interest rates are higher, tenure is low, and there are some other benefits. But, to give it a tough competition, India's one of the largest private banks - ICICI bank – has rolled out a special FD scheme for senior citizens.

What it is, and how can you get the maximum benefits; here are all the things you need to know about:

'ICICI Bank Golden Years FD'

This new FD scheme is named 'ICICI Bank Golden Years FD' by the bank. The scheme offers an interest rate of 6.55% per annum for deposits up to Rs 2 crore. The tenure of this deposit can be anywhere between more than 5 years to 10 years.

The most appreciable thing about the scheme is its interest rate. The scheme offers 80 basis points (bps) to the senior citizens, which is way higher than that of the general public (non-senior citizens) or the earlier rate provided to senior citizens. ICICI bank used to offer 50 bps to the senior citizens. But now, the FD has jumped to 80 bps with a single leap.

Talking to the media about this new scheme, Pranav Mishra, Head – Liabilities Group, ICICI Bank, said, "We at ICICI Bank have always valued our relationship with senior citizens. We know that FD interest is a key source of income for a large section of senior citizens. Keeping this in mind, we are offering higher interest rates to them through the new scheme, even in the declining interest rate regime, as a mark of our respect to them. We believe that this scheme will help them to create a good pension kitty on their long-term deposit and thereby enhance their convenience."

Some important points to note:

● The scheme is applicable to both new and the old FDs. If any customer already has a similar scheme in the past, he/she can renew the FD plan to the latest one. However, an old FD can only be renewed if its amount is less than Rs 2 crore singularly.

● The 'ICICI Bank Golden Years FD' is only available from May 20 to September 30, 2020.

● Customers can take a loan against their FD. The principal amount of loan can be up to 90% of principal and accrued interest of FD.

● Customers can also get a Credit Card against FD. Though, the interest rate on this credit is not cleared yet by the bank.

If you are interested in the scheme, you can open a Fixed Deposit using the ICICI bank's official app for net-banking and mobile banking. However, if the internet is not your preferred way, you can go to your nearest ICICI Bank branch.

Found the piece helpful? Keep reading BankingOnTips to know more about how you can save more of your hard-earned money.

Amidst the ongoing coronavirus pandemic, the government has made several announcements to ensure proper relief for the people. One such announcement was the reduction in statutory deductions on Employees’ Provident Fund (EPF) contributions.

In a press conference, the Finance Minister Nirmala Sitharaman informed that according to new rules, the EPF’s contribution for both employees and the employers will be cut by a total of 4% for the May-July period.

During the press conference, Sitharaman said, “Businesses need support to ramp up production over the next quarter. It is (also) necessary to provide more take home salary to employees and also give relief to employers in payment of provident fund dues. Therefore, statutory PF contributions of both employers and employees will be reduced to 10% for all establishments covered by EPFO for the next three months.”

Let us understand what does that mean:

According to the social security rule, an employee has to make a monthly contribution of 12% the monthly pay that includes basic pay, retaining allowance and dearness allowance as EPF deductions for the retirement kitty maintained by the Employees' Provident Fund Organisation (EPFO). Now, the employer too has to pay the same amount, i.e., 12% of the employee’s basic pay into the EPF.

To understand clearly, let us take an example. If a person’s monthly salary is 30,000, he/she will have to pay Rs 3,600 a month (12% of basic pay) as a contribution towards EPF. The employer also had to pay the same amount each month.

Now, after the announcement by the Finance Minister, the statutory deduction has been reduced with a cut of 4% (2% each for the employer and the employee). In simple words, the EPF contributions have now been reduced to 10% each for 3 months.

However, this rule does not apply fully to central public sector enterprises and state Public Sector Undertakings (PSU). They will continue to pay 12% of the employer share while the employees will give 10%.

How it will affect the salary?

This relief measure will offer two benefits: It will reduce the employee costs for private companies and the employees will take more salary home with a 2% increase. These will increase the liquidity for individuals in the times of cash crunch.

However, there are some confusing “cons” as well about what will happen to the employer’s 2% contribution. Usually, the 12% contribution made by the employer is included in the total CTC of an employee. But now, with the reduction in the mandatory amount, some employees might not pass the benefit of the remaining 2% to the employees.

These doubts will linger in the minds until further PF notifications are released by the authorities.

For more such updates, keep reading BankingOnTips.

The 21-day lockdown has been extended and so have the worries of small time investors. In the view of rising number of corona virus cases, an uncertainty of the future is also looming on the country’s economy. However, not everything has gone black for now. The Indian government is coming up with various relief orders and ways to help the people. 

Recently, the Finance Ministry announced that the government has decided to relax regulations on account holders of Public Provided Fund (PPF), Sukanya Samriddhi Account (SSA) and Recurring Deposits (RDs). They have decided to increase the deadline for mandatory minimum deposit for FY 19-20 by three months up to June 30.

Here is what the tweet said:

"Relaxation of provisions for Account holders of PPF, Sukanya Samriddhi Account (SSA) and RDs (recurring deposits). Govt has taken the decision to safeguard interests of small savings depositors in view of the lockdown in the country due to #Covid19 Pandemic,"

The guidelines also noted that “All those PPF subscribers, whose accounts were matured on 31.03.2020 (including one year window for extension), can now be extended upto 30.06.2020.

The Announcement

The government has made new rules for the PPF, SSA and RD account holders. An official memorandum released by the ministry touched upon important points which are as follows: 

• The date of the deposit of minimum amount in PPF, SSA and RD account has been extended from March 31, 2020 to June 30, 2020. The users will not be charged with any penalty or revival fee between this period. 

• For this purpose, the user will have to give an undertaking to the account officer promising that the minimum deposit cap will not be breached. 

• In case there is a breach in the deposit limit, the extra amount will be returned without interest. 

• The user will have to deposit separate amounts for FY 2019-20 and FY 2020-21.

• The outstanding balance as on 31st March will be considered to decide the loan/ withdrawal from the PPF account. 

• PPF subscribers, whose accounts were matured on March 31 including one year window for extension, can now be extended up to June 30.

• The account holders will need to submit a duly filled and self-attested copy of the form of extension through the registered e-mail id to get an account extension. 

Why The Decision?

For the information, Sukanya Smriddhi Account, PPF and RD account holders are expected to deposit a minimum amount in any of the financial year between April 1 and March 31. It is usually seen that most of the people wait for the last date to make the deposit. 

This year, however, the country went into lockdown on 25 March due to which many people could not pay the amount. They were then being fined for late deposit. To solve this problem, Modi government has called for the extension of the last date. 

However, those who have already made the deposit can continue with their FY20-21 deposits.