Explained: With markets volatile, should senior citizens invest in PSU bank FDs?

• Senior citizens often prefer investing in fixed deposits (FDs) due to their stability and guaranteed returns.
  
• If a senior citizen is looking for regular income and not for growth, then she can look at FDs.
  
• To find the most suitable option, it's essential to explore the market and compare the offerings.
  

FDs have always been a popular choice for Indians. They offer a guaranteed return on investment, making them a secure option for conservative investors. Additionally, FDs provide liquidity and are easily accessible, which aligns with the risk-averse nature of many Indian investors.

With the Sensex having crashed over 3,300 points over the last six days, FDs have become even more attractive. Here we look at whether it makes sense for senior citizens to invest in FDs of public sector banks.

FD RATES OF PUBLIC SECTOR BANKS(%)
Bank of Maharashtra	7	6.75	6.25	6
Bank of Baroda	6.25	7.15	7.25	6.5
Bank of India	5.75	7.25	6.75	6.5
Canara Bank	6.25	7.25	6.85	6.8
Central Bank of India	5.75	7.1	6.5	6.5
Indian Bank	7.05	7.25	6.7	6.25
Indian Overseas Bank	5.35	7.25	6.8	6.5
Punjab National Bank	5.8	7.25	7	6.5
Punjab & Sind Bank	6.5	7.4	6.5	6
State Bank of India	5.75	7.1	7	6.5
UCO Bank	6	6.5	6.3	6.2
Union Bank	5.25	7	6.5	6.7

* As of 20 October, FD rates offered to senior citizens are normally 0.50 bps higher

Source: BankBazaar

Should you invest?

Senior citizens often prefer putting their money in fixed deposits (FDs) due to their stability and guaranteed returns. FDs offer a fixed interest rate, which provides a predictable source of income, important for retirees.

They are low-risk investments and safeguard the principal amount, ensuring financial security and peace of mind, especially during retirement when preserving capital becomes a top priority.

“There is no good or bad product. What is your profile, your asset allocation, your risk taking ability and your requirement for a regular income- these factors will decide whether you should put your money into FDs or into equities or any other asset class," says B. Srinivasan, director and founder, Shree Sidvin Investment Advisors.

For example if a senior citizen is looking for regular income and not for growth, and is confident that she does not need to look at equity, then she can definitely look at FDs of public sector banks.

However, he says that if one is looking at FDs for higher interest rates, one should remember that interest rates have not gone up considerably in public sector banks.

To get higher interest rates, one can choose to go for FDs in small finance banks. These FDs are also covered under the deposit insurance and credit guarantee corporation (DICGC) for up to ₹5 lakh. So FDs up to ₹5 lakh in each bank is safe.

“In case you want higher returns you can also opt for NBFCs and corporate FDs which have a AAA rating,” says Srinivasan. However, one needs to remember that these FDs are not covered under DICGC.

How to choose the right tenure

The tenure you choose would depend on the objective. “If the objective is to earn the highest possible interest in the shortest amount of time, mid-term deposits – typically between 1 and 3 years – may offer the best rates. On the other hand, the returns on 5-10 year deposits are marginally lower, but you could lock in to those returns for the long-term,” says Adhil Shetty, CEO, BankBazaar.com.

To find the most suitable option, it's essential to explore the market and compare the offerings. Your own bank may not always offer the most favourable terms, so it's important to consider alternatives.