State Bank of India or SBI cut interest rate on retail fixed deposit or FDs by 20 to 25 basis points, with effect from 10th September, the second revision in about two weeks. The interest rate on term deposits at Post Offices, which are revised every quarter, are due for revision this month-end. Many banks have been lowering their FD rates amid surplus liquidity and sharp cut in RBI repo rates. Analysts say that the interest rates on post office term deposits and other small savings schemes are also set to come down amid falling interest rate scenario.
Post office term deposit schemes are similar to bank FDs. Post offices offer term deposits ranging from one year to five years. Like bank FDs, investors earn a guaranteed return through the tenure of the post office term deposit. The interest on Post Office deposits was revised on 1 July 2019. For one-year time deposit, Post Office offers an interest rate of 6.9%. For time deposit for a tenure of 2 and three years, it offers an interest rate of 6.9%. For five year time deposit account, Post Office offers an interest rate of 7.7%.
Here is a comparison of FD accounts offered by SBI and Post Office:
1) For an SBI FD account, the tenures may vary from 7 days to 10 years, depending upon the need of investment, whether it is for short-term or long-term. But Post Office term deposit schemes are either for 1 year, or 2, 3 or 5 years.
2) SBI FD interest rates vary between 4.50% to 6.70% for general customers. Post Office FDs offer interest ranging between 6.9% to 7.7%.
3) You can open an SBI FD account online through net banking facility, but for opening a Post Office term deposit account you have to visit the post office branch.
4) The USP of the Post office term deposit schemes is that it is backed by the government and rates are revised every quarter. But in case of SBI, there is no such rule. Bank FD rates gets impacted after the Reserve Bank of India (RBI) changes its repo rate.
Latest Post Office term deposit interest rates with effect from 1 July 2019
SBI latest FD interest rates (below ₹2 crore) for general public effective 10 September
7 days to 45 days 4.50%
46 days to 179 days 5.50%
180 days to 210 days 5.80%
211 days to less than 1 year 5.80%
1 year to less than 2 year 6.50%
2 years to less than 3 years 6.25%
3 years to less than 5 years 6.25%
5 years and up to 10 years 6.25%
5) Portability of account is possible in both SBI and Post Office term deposits.