Where To Invest Other Than Small Savings Schemes To Reap Good Returns?

For this year 2021 till March 31, the government has retained interest rates for Small Savings Schemes steady. Small savings schemes are the perfect choice in the current interest rate scenario for risk-averse investors. Post office small savings schemes offer higher returns, tax benefits and are backed by the government which makes an investor the only vehicle to invest as of now. Whereas, according to banks' portals, the interest rates on long-term FDs from public sector banks (PSBs) are lower than what post office savings schemes bid.

For the general public

For FDs between 3 and 10 years, the State Bank of India provides between 5.3 percent and 5.4 percent returns. For similar tenure HDFC Bank will fetch you an interest rate of 5.3% to 5.5% and ICICI Bank will give you a low interest rate of 4.25% only. On the other side 5.5% and 5.25% interest rates are currently provided by Canara Bank and Punjab National Bank for the same tenure. But when it comes to post office small savings schemes you can reap good returns starting from 4% to 7.6%. The 3 and 5 years post office fixed deposits will currently fetch you an interest rate of 5.5% and 6.7%, whereas the 5-year post office monthly income scheme will provide you a higher return of 6.6%.

FDs from PNB housing, Floating Rate Savings Bonds and ICICI Home Finance are some alternatives which can give you very close returns as of above discussed small savings schemes. For deposits of between three and 10 years, PNB Housing provides 6.6-6.7 percent. 7.15 percent is the interest rate on Floating Rate Savings Bonds and ICICI Home Finance will fetch you an interest rate of 5.95% to 6.10%. That being said, the interest rates on these bonds may adjust every quarter, much like small savings schemes, and the government has yet to disclose the new interest rate on these instruments.

Post Office Savings Schemes Interest Rates

 

Small Savings Schemes	ROI in %	Min & Max Deposit
Post Office Savings Account	4	Rs 500, no upper limit
5 Year Post Office RD	5.8	Rs 100, no upper limit
Post Office Time Deposit	1 to 3 year - 5.5, 5 year - 6.7	Rs 1000, no upper limit
Post Office Monthly Income Scheme	6.6	Rs 100 up to 4.5 lakh for single holder and 9 lakh for joint
Senior Citizen Savings Scheme (SCSS)	7.4 ​%	Rs 1000 up to Rs 15 lakh
15 year Public Provident Fund Account (PPF)	7.1 %	Rs 500 up to Rs 1.5 lakh
Sukanya Samriddhi Account	7.6​​%	Rs 250 up to Rs 1.5 lakh
National Savings Certificate	6.8 %	Rs 1000, no upper limit
Kisan Vikas Patra (KVP)	6.90%	Rs 1000, no upper limit

For senior citizens

7.4 percent, which is higher than bank FDs for retirees, is the interest rate on the Senior Citizen Savings Scheme for the current quarter. Whereas, Pradhan Mantri Vaya Vandana Yojana is another government-backed initiative for seniors. It is offered by Life Insurance Corporation of India. Depending on the regularity of payment a retiree prefers, the interest rates differ according to the scheme. The rates are up to 7.66 percent if the senior wishes to receive annual payments. These are 7.52 percent, 7.45 percent and 7.4 percent respectively for semi-annual, quarterly, and monthly payments.

But apart from the above discussed, there are some banks that offer up to 7.45% returns on 3 to 5 years FDs. And the two most preferred government schemes are always considered to invest when it comes to senior citizens i.e. VPF and PPF, currently VPF is giving an interest rate of 8.65% which is much higher than bank FDs and PPF is providing an interest rate of 7.1% which comes with a tenure of 15 years.

Our take

The interest rates are either going to stay the same or may even decline according to some financial advisors. Their actual return could be low or poor if inflation continues to stay high. Therefore, unless they are elderly, conservative investors should have a multi-asset strategy. There are multiple high-risk investment vehicles that have the ability to yield better inflation-adjusted returns in the long term than other investment products while some assets have low-risk and thus yield low returns. Before investing, you must compare your own risk tolerance with the related risks of the commodity while choosing an investment avenue.