Banks Offer Special Deposits Opening Window For Higher Returns

Banks are looking to get more deposits as their advances rise at a higher rate than the deposit inflow. As a result, many banks are now offering special-period deposits to entice investors to invest and earn a higher rate of return. This becomes an attractive option for investors, as it allows them to ensure that their money is earning a higher rate, while also ensuring the safety of the instrument.

Tackling these deposits the right way can be beneficial for the investors, and here are some steps to follow.

Banks offer a variety of fixed deposit types. Most of them feature a standard bucket period, offering different rates based on the length of time the investor is willing to invest. In order to attract a higher level of interest from investors, the banks are offering a special period deposit. This is a fixed deposit that has a specific time period, such as 400 days, 555 days, and so on. These deposits normally have a higher rate of interest, which makes them attractive. This higher rate is applicable only for this specific time period.

The benefit of this is that the bank can offer a higher interest rate without having to raise it for all of the time periods for which they offer deposits.

One of the first features that the investor needs to check is the time period for which the special-period deposits are available. Some banks have had these for a long time, while others might introduce them only for a short, specific time period. They may use this period to mobilize the necessary funds before discontinuing them. Depositors must closely examine the details to determine the duration for which the higher rates are applicable. For example, the latest special period deposit from the State Bank of India is available until March 31, 2025. Some banks might not expressly mention the time period for which these deposits are available, but they can withdraw them at short notice.

Selecting the special period deposit offers the advantage of earning a higher interest rate on your investment.

A look at the various deposits that banks have on offer shows that a higher rate of 7.25% is available for many of these deposits, be it from the Bank of Baroda to the Bank of Maharashtra. HDFC Bank offers 7.40% for a 55-month deposit. The periods on offer also vary, and the investor should have a clear strategy in place when they are selecting these deposits. One of the things they need to match is the time period for which they want to invest. If this is similar to the deposit period, then it would be a good match. In other cases, the investor might even want to lock themselves into a higher rate for a longer period of time.

The investor who is looking for a fixed deposit should ensure that they do not complete this investment without considering the bank's special period offerings. A little bit of effort on this front can be useful in the sense that they could end up with a higher rate of return on their investments. The rate that they would get for normal-period deposits would most likely be lower, but matching the time period of the investment also matters for them, so this factor should not be ignored.

Arnav Pandya is founder of Moneyeduschool