Difference between Post Office FD and Bank FD


Post Office vs Banks: Which one is better for opening fixed deposits?

Representative image. News 18 Hindi

People in India look up several investment opportunities when it comes to saving money for the future. While many risk-takers firmly believe in experimenting with investment options like mutual funds, the stock market, as well as cryptocurrency for gaining short-term returns with better interest rates, some traditional investors still look upon options like fixed deposits and recurring deposits for savings and making investments.

Besides savings bank accounts, a large section of the population in India has fixed deposit accounts in their banks. On the other hand, some also rely on post offices that provide equivalent interest rates and further assure risk proof and assured returns in comparison to savings bank account interests.

However, as the Reserve Bank of India (RBI) continues to make certain changes in interest rates throughout the year, further determining the future benefits that can be obtained by the depositors.

In the recent repo rates announced by the RBI in August this year, while fixed deposit rates in both public and private banks were increased, the one for post offices remained the same. Though one question still remains- which option would be the best returns for fixed deposits?

Notably, as both banks, as well as post offices, are safer means for opening a fixed deposit, investors need to have a detailed account of both sides to further draw a comparison between the two.

Difference between Fixed Deposits in banks and post offices

After the RBI revisions this year, current repo rates in banks stand at 5.4 percent. As a part of this, while most of the banks provide decent interest rates, the amount varies from bank to bank and also with regards to different time periods.

For example, in the case of different banks, depositors can opt for schemes from seven days to 10 years, depending on their need. While the interest rate between one-three years is the same, it is a bit more for three years and above.

If we speak of the State Bank of India (SBI), the country’s biggest government bank offers an interest rate between 5.45 percent and 5.50 percent on deposits between one year to three years. For a tenure of three years and above, it offers 5.6 percent.

On the other hand, speaking about post offices in India, they offer fixed deposit schemes under different tenures as well as interest rates. While the minimum amount for the FD scheme is Rs 1,000 for both general and senior citizens, the interests are paid annually.

While for deposits between one to three years scheme, post offices provide an interest rate of 5.5 percent, for a five-year term, the rate stands at 6.7 percent, which is very high in terms of banks. Another benefit of post offices is that their interest rates are revised quarterly.

That being said, with the clear differences between FDs in banks and post offices, investors need to research thoroughly and make a choice as per their financial goals.

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