Good old bank deposits are back in trend

New Delhi: The good old bank deposit is back in vogue. But this time around, it is for longer deposits.

Returns are as high as 14 per cent for senior citizens on an 8-10 year investment.

'Double your money in eight years', no it is not an equity investment, but a bank Fixed Deposit, FD, which promises that.

Bank of India and Union Bank of India have come out with long- term FDs of 8-10 years maturity, with 8 per cent interest.

The annualised yield on this investment turns out to be above 11 per cent. The number goes up to over 14 per cent for senior citizens on an annualised compounded basis.

Banks are hoping that risk averse investors will lap up these schemes in the absence of infrastructure bonds.

They also hope to reduce the mismatch in their assets and liabilities.

"This product tremendously helps in correcting the mismatch in the assets and liabilities portfolio. Substantial investment has gone into infrastructure last year. Most of it is for a 7-12 years range, while our deposits are short-term," Union Bank of India CMD M V Nair said.

These FDs can be started with as little as Rs 5000. Senior citizens will get 0.5 per cent to 1 per cent higher interest.

Normally, for five-year FDs, banks are offering between 6.75 per cent to 7.25 per cent interest, while a PPF and NSC offer an 8 per cent interest with a six-year lock in period.

PPF gives tax-free returns, while the returns on NSC are taxable.

The budget this year included long term FDs in the category of investments under section 80C for a deduction of Rs one lakh.

This could add to the returns even more. However, this is yet to be notified.