Bad Days for Savers;Select Fixed Deposit only Hope

In a major blow to savers across the country, the State Bank of India (SBI), the largest lender in India, has announced its decision to cut interest rates on savings bank accounts with balances of Rs.1 crore and below. The interest rates on savings bank accounts will be cut to 3.5% as compared to 4% earlier. This has been informed by SBI as part of its regulatory filing to the stock exchanges. Around 90% of the savings bank accounts at SBI have balances lower than Rs.1 crore.

For balances above Rs.1 crore, the interest rates will be 4%. The change in the interest rates marks the introduction of a two-tier savings account interest rate system. This move has been attributed towards boosting SBI’s margins and also since inflation has come down. SBI has talked of how this decline in inflation and the high real estate rates are the major factors behind this revision in savings bank account interest rates.

In the current scenario, it may only be a matter of time before other lenders follow suit and lower their savings bank account interest rates. This spells bad days for savers who accumulate their savings in these accounts. As a result, a better option would be to invest in Fixed Deposits. One of the biggest Fixed deposit benefits is that these accounts offer higher interest rates as compared to savings bank accounts.

On an average, the interest rates offered on FD accounts range between 6.5-8% depending on the financial institution in question. This offers better growth for your hard-earned money instead of keeping it idle in savings accounts where it earns low returns. There are several advantages of Fixed Deposits that you must be aware of. Firstly, these investments are free from any market related risks and interest rate fluctuations. You invest a sum of money for a fixed period and at a fixed rate of interest. Fixed Deposits are completely safe investment for money and are a must in your portfolio.

You can choose to compound your money and get the total interest paid out at maturity if you wish to earn a higher return on your investment. However, you can also choose to receive interest payouts at monthly/quarterly/half-yearly/annual intervals in case you wish to create an income stream for yourself. This is the beauty of Fixed Deposits. They can be withdrawn anytime before the maturity period by paying a nominal charge and you can also get a loan against your FD. This helps you access urgent funding instead of having to break your fixed deposit prematurely.

You can use an online FD Calculator to learn about the interest that you will receive along with the maturity value of your FD. You can apply for a Bajaj Finance FD which gives you higher interest rates of 7.85% and many other benefits.

Arwind Sharma is a financial advisor with an experience of more than 7 years. He has worked for topmost financial firms in India and has been a visiting faculty at many reputed institutes in India.