When it comes to safe investments, there is no doubt about the fact that a fixed deposit is a very attractive option since it provides safety coupled with steady growth. Some fixed deposits also go so far as to offer income tax benefits on the amounts invested in them each year. However, there are times when the people who invest in fixed deposits need to maintain constant access to that investment so as to be able to augment their monthly income. Taking these needs into consideration some banks offer specific fixed deposits that are known as monthly income plans and help augment their monthly income.
What a monthly income fixed deposit is basically a fixed deposit that can be created and earns an interest in much the same way a regular fixed deposit does with a few differences. The being that with a monthly income plan the investors either have access to the amount deposited or are paid the interest earned on a monthly basis. Some banks even let depositors withdraw the interest every month from regular fixed deposits at discounted interest rates. The monthly income plans are generally linked to a bank account and the interest earned is credited into that account.
While the features of these accounts can vary from one bank to another, a general set of features that you may see with these accounts are:
The interest rates on these accounts tend to follow the same rates as those prescribed for the regular term deposits. They also tend to offer senior citizens a higher interest rate which can be anything from 0.25% to 0.5% over the applicable rates. These rates are decided by the banks so it’s best to confirm the exact rate with the banks before investing. With some banks, current and past employees of that banks also get higher interest rates.
If you are using a regular fixed deposit and withdrawing the interest every month to augment your income, you should know that sometimes banks will provide discounted interest rates.
The eligibility criteria for these deposits follow the same rules as those for the regular term deposits where any individual, company, HUF or association of people can open the fixed deposits. Even NRIs are eligible to open monthly income FDs.
The documents required also tend to be the same and will include the application form along KYC documents like an identity proof, address proof etc.
The biggest advantage of the monthly income fixed deposit is that with these products, if depositors need extra money in a month, they don’t have to liquidate that entire deposit. They can just withdraw what they need.
Bajaj Finance Ltd has recently announced that the minimum limit on its Fixed Deposit (FD) scheme will be Rs.25,000. The company will offer an annual interest of 8.05% on deposits made for a tenure of 36 to 60 months. Earlier the minimum deposit amount was Rs.75,000 in Delhi and Mumbai, and Rs.50,000 in other parts of India. Senior citizens will receive an additional interest of 0.25% on deposits of up to Rs.1 crore. Existing customers will receive an additional interest of 0.10%.
12th April 2017
The first half of March saw around 50 lakh transactions instead of the average 20-30 lakh annual transaction rate. Around 13 lakh new accounts were opened in the second half of March as against an average of 4-5 lakh in a month, according to a Post Office official. Post Office savings schemes, such as the Monthly Income Account, gives the interest rates in vogue at the time when the account is opened. For instance, if you open a Monthly Income Account before April 1 at the post office, you will receive the interest rates prevalent before the rate cut came into force.
The government has reduced the interest rates of several small savings instruments. The five-year National Savings Certificates interest rate has been brought down to 8.1 percent instead of 8.5 percent earlier. For the five-year Monthly Income Account, you’ll get only 7.8 percent as against the earlier 8.4 percent.
19th April 2016