The rising interest rate cycle has brought fixed deposits back into the limelight. FY23 saw a significant increase in bank FD rates across segments, as RBI hiked the repo rate by 250 basis points from May 2022 to April 2023. The country’s largest lender, State Bank of India has launched a scheme with a tenure of 400 days called ‘Amrit Kalash’ deposit. Here is a review.

Interest, charges

The 400-day tenure retail term deposit scheme was initially open from February 15, 2023, to March 31, 2023. Now, the scheme has been extended and is open from April 12, 2023 till June 30, 2023. The rate of interest being offered is 7.1 per cent for regular citizens. Senior citizens get an additional 50 basis points i.e., 7.6 per cent. In addition to senior citizens, staff and staff pensioners are also eligible for additional interest rate.

Domestic retail term deposits, including NRI rupee term deposits (< Rs 2 crore), new and renewal deposits, and term deposits and special term deposits, are eligible to take advantage of the Amrit Kalash scheme. Note, interest is paid on term deposits at monthly, quarterly, and semi-annual intervals. The maturity interest on special term deposits, net of TDS, will be added to the customer’s account.

TDS will be deducted in accordance with Income Tax Act guidelines if Form 15G/H is not submitted.

SBI Amrit Kalash, like any SBI term deposit, will attract a penalty if the deposit is withdrawn before tenure. If the deposit is below ₹5 lakh, the penalty for premature withdrawal will be 0.5 per cent and deposits above ₹5 lakh will attract 1 per cent penalty.

Depositors can take part in the Amrit Kalash scheme in one of the following three ways: by visiting a branch, through internet banking and through the YONO application.

Our take

The rate offered on the 400-day SBI Amrit Kalash deposit scheme is 7.1 per cent, which is lower than that offered by some of its peers. Commercial banks such as IndusInd offer regular depositors 7.5 per cent interest and senior citizens 8 per cent (1-1.5 years tenure). Axis provides regular depositors 7.15 per cent and senior citizens 7.9 per cent (13-14 months tenure). IDFC First Bank (tenure of 367-548 days) and Canara Bank (tenure of 444 days) offer regular depositors 7.25 per cent and an additional 50 basis points to senior citizens.

Small finance banks (SFBs) for the same tenure provide higher rates. For 12-18 months tenure, Equitas SFB offers regular citizens 8.2 per cent and senior citizens 8.7 per cent. Fincare SFB offers regular depositors 7.5 per cent and senior citizens 8.1 per cent for 12-15 months tenure. For the same tenure, AU SFB offers 7.6 per cent to regular citizens and 8.1 per cent to senior citizens.

Do note that State Bank of India is a systemically strong and sound bank compared to SFBs. As one of the largest banks in the country, it has a large branch network and, therefore, has a better reach. Therefore, investors should consider these factors before taking an informed decision, and not base their investment decision solely on interest rate.