With 5 subsequent repo rate cuts announced by the RBI to boost growth rate of the economy, corporate FD rates have experienced a substantial reduction. Such measures are adopted by the government to maintain the productive capacity of India during the expected upcoming recession of 2020.
Nonetheless, a reduction in the interest rates adversely impacts individuals dependent on fixed income sources, and interest income comprises a substantial portion of their annual proceeds. Many NBFCs such as Bajaj Finance extend high corporate FD rates as annual returns on fixed deposit investments. Numerous other advantages are associated with such investment tools, making it a popular option among senior citizens in the country.
Features of senior citizen fixed deposits
The reasons behind the popularity of such tools can be attributed to the following pointers –
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Higher corporate FD rates
Senior citizens are offered higher interests of up to 8.35% on total deposit amounts, compared to standard deposits maintained by individuals. Provision for monthly, quarterly or half-yearly withdrawal of total interest earned is also maintained, allowing aged individuals to meet all stipulated expenses.
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Flexible tenor
An investor can determine the total tenor of deposit based on his/her financial goals and upcoming expenses. Such benefits are not provided by other investment tools available in the market such as the PF fund, which can only be withdrawn upon retirement or unemployment.
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Security of corpus
Fixed deposits have no direct links to the stock market of a country, and hence are devoid of any fluctuations on the returns generated once the investments are made. As senior citizens rely on a fixed income, security of the total investment is of crucial importance to them. Thus, to understand which is better between fixed deposits and equities, fixed deposits prove to be a better financial tool for senior citizens.
Also, such stability of fixed deposits allows individuals to undertake sound financial planning by calculating the total net worth of funds upon maturity of such deposits.
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Loans against fixed deposits
Any emergency expenses such as medical costs can be financed by obtaining a loan against a fixed deposit. High-value credits of up to 70% of the total deposit value are extended in many situations. No additional documents have to be furnished in such cases, as it is similar to the documents required to open a fixed deposit account already deposited with an NBFC. No extra charges are levied on the event of part prepayment or foreclosure of the loan as well.
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Easy investment procedure
Major financial institutions provide online account opening and management facilities. Such benefits are attractive to senior citizens as they don’t have to visit their nearest branch every time as all issues can be resolved online. Individuals can also opt for auto-renewal facility if they choose to reinvest the amount in the same scheme.
Such benefits of fixed deposits make it an ideal tool for investment for senior citizens. Upon retirement, a substantial amount is disbursed to senior citizens through their PF fund, which can be, in turn, deposited in such accounts by opening an account online.
Opening a fixed deposit account online
Step 1 – Choose a financial institution offering high interest on senior citizen fixed deposits.
Step 2 – Fill the online application form and submit the same on the official portal.
Step 3 – Keep a hardcopy of the application form along with KYC documents and passport-sized photographs to be furnished to the representative of the financial institution contacting you.
Step 4 – Transfer the deposit amount to the respective NBFC through cheque, NEFT or RTGS.
You should receive a confirmation message regarding successful account activation. Interest accrual will start from the day of activation of the fixed deposit and can be withdrawn or added to the principal, as chosen by an individual. Senior citizens can benefit significantly through such returns at high corporate FD rates of up to 8.35% offered by major financial institutions.