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On a post-tax basis, returns
Interest rates on fixed deposits (FDs) are nearly at their all-time lows. These are not the best of times if you wish to invest in a financial instrument for getting some regular income. For instance, State Bank of India’s three-year FD for senior citizens gives 5.80 percent interest. A one-year FD offers interest of 5 percent. The prevailing inflation rate is around 5.59 percent. So, on a one-year FD, you would be earning just about the inflation rate, and may be lower on a post-tax basis, especially if you fall in the higher slabs.
A rise in the interest rates, which many experts predicted would happen, hasn’t yet come to pass. If interest rates rise, bank FD would also yield more. But given that credit offtake is slow, banks may not be in a rush to raise interest rates due to a good stock of retail deposits already with them. That is not good news for depositors who depend on fixed deposits for their regular income. But there are still pockets of opportunities around.
