SBI RD
The largest lender in the nation, State Bank of India (SBI), allows recurring deposits for durations of 12 months to 120 months, with a minimum deposit requirement of Rs. 100 every month thereafter in multiples of ₹10. SBI provides facilities for RD accounts including nomination, loan/OD against deposit, account transferability across bank branches, and fixed rate of interest as applicable to term deposits. SBI is providing interest on recurring deposits in the range of Rs. 5.45 to 5.65% for the general public and Rs. 5.95% to 6.45% for senior citizens.
However, considering the 5-year maturity period, investors would receive an interest rate of 5.60% and must deposit ₹10,000 per month for 5 years in order to receive ₹6.93 lakhs at maturity. Across all tenors of their RDs, senior citizens will get an additional rate of 0.50% or 50 basis points, and on deposits maturing in 5 years, they would receive an interest rate of 6.10%. They will therefore receive ₹7.02 lakh after five years of maturity if they invest ₹10,000 every month.
Post Office RD
Post Office Recurring Deposit Account (RD) comes with a maturity tenure of 5 years. A monthly contribution of at least INR 100 or any amount in multiples of INR 10 with no maximum limit may be made to open a single or joint post office RD account. After depositing 12 payments and keeping the account open for a year without discontinuing it, the depositor is eligible to get a loan of up to 50% of the account's credit balance.
The interest rate for the loan is 2% in addition to the RD interest rate that applies to the RD account. The post office RD scheme offers an interest rate of 5.8 % per annum quarterly compounded and if an investor invests ₹10,000 per month then he or she will get ₹6.96 lakh at maturity after 5 years. The post office RD scheme does not offer additional interest rate benefits for senior citizens, and the account can be kept open for an additional 5 years following maturity.
Where to invest?
Similar benefits are offered by both SBI RD and Post Office RD, however, the interest rates differ. SBI offers an interest rate of 5.60 per cent for non-senior citizens and a rate of 6.1 per cent for senior citizens, whereas Post Office RD offers an interest rate of 5.80 per cent for both non-senior citizens and senior citizens. Based on this comparison, we can conclude that Post Office RD would be the best option for non-senior citizens because it is providing a 20 basis point higher interest rate than SBI, but it might not be the best option for senior citizens because they can get up to 6.10% from SBI RD.
However, in light of India's retail inflation rate, which was 6.71% in July 2022, neither SBI nor Post Office RD is able to produce inflation-beating returns, even in the case of rising interest rates. However, if it only relates to investments in recurring deposits, investors can check out the recurring deposit accounts of some small finance banks where they can earn interest rates between 8% and 8.50%, which is significantly higher than the inflation rate and enables them to earn returns on their investments that are higher than the rate of inflation in the economy.
