Retail investors who prefer fixed deposits (FDs) as an investment now have another option available: ‘special rate’ short-term FD schemes. These schemes cater to the investment needs over a specific period of time. Major banks like Bank of Baroda (BoB), Indian Bank and State Bank of India (SBI) have extended the last date for investment in this special term deposit scheme till March 31, 2025. This scheme was launched in the middle of the year 2024 and it offers higher interest rates.
These special FD schemes offer higher interest than traditional FDs. These schemes are suitable for investors who do not take much risk and want better returns in the short term. For example, Bank of Baroda’s BoB Utsav Deposit Scheme has a tenure of 400 days, while it has launched Amrit Vrishti and Amrit Kalash schemes, which have maturity periods of 444 days and 400 days respectively. Moreover, the tenure of Indian Bank’s Special Term Deposit is 300 days.
High interest rate for limited period
BoB Utsav Deposit Scheme offers interest rate of 7.30% for a tenure of 400 days, while senior citizens will get 0.5% more i.e. 7.80% interest. Similarly, SBI’s Amrit Vrishti Scheme offers 7.25% interest on deposits of 444 days. Senior citizens will get 0.50% more i.e. 7.75% interest on this. The interest rates on special schemes are higher than normal FD schemes.
For example, a one-year FD from Bank of Baroda gives 6.85% interest per annum, while an FD with a specific tenure of 400 days will give 7.3% per annum. Similarly, SBI is offering 6.8% annual interest on FDs with a tenure of more than one year and less than two years, while Amrit Vrishti Scheme with a tenure of 444 days is giving 7.25% annual interest.
Why have banks launched such FD schemes?
A remarkable trend was seen in the country’s banking sector last year and the credit growth of banks outstripped the deposit growth. In such a situation, concerns regarding asset-liability imbalance increased for the central bank. In the year 2024, the credit growth of banks was 11.1 percent, while the deposit growth was 9.1 percent. The Reserve Bank (RBI) is keeping an eye on the situation and is asking banks to maintain a stable deposit base. Amol Joshi, founder of Plan Rupi Investment Services, a Mumbai-based firm, says banks use special tenure FD schemes to correct their asset-liability imbalance.
Who should invest?
Short Term Special FD Schemes are the right option for those looking for guaranteed returns in short periods. According to financial advisors, investors who do not take much risk can consider investing in these schemes, where the interest rate is more than 7 percent. Senior citizens have more benefit in these schemes because they get additional 0.5% interest.