All You Need to Know About SBI WECARE, Senior Citizens Deposit Scheme.
Listen to All You Need to Know About SBI WECARE, Senior Citizens Deposit Scheme.
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After the RBI repo rate cut, the country's biggest lender, State of Bank of India, reduced its lending rate and its interest on term deposits.
SBI slashed it sinterest rates on term deposits for upto three years by 20 basis points that was made effective from May 12, 2020. With regards to the lending rate, the marginal cost of funds based lending rate (MCLR) is reduced to 7.25 percent from 7.40 percent with effect from May 10.
The fall in rate is like a double-edged sword because though on one hand it is helpful to induce more borrowing activity, but at the same time, it just repels away people to invest in term deposits.
In the COVID-19 pandemic situation, when people want to preserve their investments and are moving to traditional investments, Senior citizens who usually have investments in fixed deposits do not earn that extra return when inflation on essential items has risen.
(Image source: Image by Charles Thompson from Pixabay )
So, in yet another announcement, the State Bank of India introduced a new Deposit Scheme "SBI WECARE" with an intent to protect the income of senior citizens by offering additional interest on Term Deposits.
Features of WECARE
As per the scheme, a senior citizen is eligible to invest for a term of five or ten years through any SBI bank branch or online or through its app. Senior citizens get an opportunity to earn an additional premium of 30 bps (over and above existing premium of 50 bps) offered to the public on the retail term deposits. That means a combined 80 points extra compared toa regular term deposit rate of 6%.
The interest, net of TDS, shall be credited to the customer's account on maturity only. For senior citizens, TDS will be deducted if the total interest in a financial year exceeds Rs 50,000. It may be noted that this additional interest will not be payable if one prematurely withdraw such deposits.
This scheme would be in effect up to September 30, 2020, it added. Besides this, one can also avail of a loan against this special WECARE scheme.
Outlook
The bank had consecutively reduced rates in a month and it seemed like it wasn't able to protect the senior citizens' money. So, to safeguard their income, the bank has introduced the WECARE scheme. Although the returns on a fixed deposit would be secure and fixed, remember they are still taxable, which means that this investment avenue cannot fetch inflation-adjusted returns.
[Read: Has COVID-19 Lockdown Changed Your Money Management Outlook ]
However, to preserve capital in current pandemic times, making mindful choices in terms of investment is crucial. The WECARE scheme is a good initiation but diversifying your investments can provide you with better returns.
[Read: Make Mindful Choices of Mutual Fund investments in Current times]
For a person, who is almost retiring, it would be wise to have a mix of investments like FDs, SCSS, and other small saving schemes that provide you with capital preservation, safety, and regular income, mutual funds will help you in capital appreciation, countering inflation, and give you instant access to funds (since mutual funds are highly liquid investment avenue).
This means that traditional investment options and mutual funds are both important for retirees. Also, remember to set aside some amount towards contingencies. Before you start investing, be clear about your goals, risk appetite, investment horizon, and estimated life expectancy. This will help you secure your financial future.
Warm Regards,
Aditi Murkute
Senior Writer
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