Post Office Time Deposit vs SBI Fixed Deposit: For the second time in a month, the largest lender State Bank of India decided to cut fixed deposit rate this week. The SBI cut retail FD rates by 10 to 50 basis points across tenors. There was also a 30-70 basis-point cut across tenors in case of bulk deposits. While the revised rates will come into effect from August 26, the largest commercial lender blamed falling interest rate scenario and surplus liquidity as the reason for the FD rate revision. SBI fixed deposit investors are at a loss because of the rate cut. The bank had last cut FD rates on August 1. 

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In the wake of the Reserve Bank of India (RBI) slashing repo rates regularly for last many months, commercial lenders like SBI are compelled to pass on the benefits to customers in the form of rate cuts on loans. To balance off excess liquidity, however, it has been reducing interest on FD as the low rate will discourage depositors. 

The RBI is expected to further cut the repo rate in the upcoming MPC to address the liquidity crunch in the market and boost economic activities.

In a growing low-interest scenario, are you wondering where to invest in FD if not SBI or other commercial lenders? Well, the humble post office near you may provide the answer. 

Post Office is considered to be one of the best places for small investors who want good and safe returns on their deposits. Also, the FD rates offered by the Post Office is higher than the SBI. 

Currently, on a five-year deposit at the post office, you can get a 7.8% interest. if you invest Rs 1,00,000 in 5-year post office FD today, it will grow to Rs 1,40,155 on maturity. Similarly, Rs 50,000 will grow to Rs 70,080 in five years and Rs 2,00,000 to Rs 2,80,310. 

In contrast, Rs 50,000 in SBI fixed deposit will grow to Rs 68,179 at 6.25% interest rate from August 26; Rs 1,00,000 will turn into Rs 136353 and Rs Rs 2,00,000 will give just Rs 2,72,707 in five years. 

From the above numbers, you can see that the post office will give higher returns. The rate of interest on other tenors at post is also higher than the SBI.