Bank FD with a Twist! Get monthly income as EMI by investing a lumpsum amount

The lump-sum amount deposited is repaid over a period in equated monthly instalment which comprises part of the principal amount and interest on the reducing principal amount.

Bank FD with a Twist! Get monthly income as EMI by investing a lumpsum amount

SBI Annuity Deposit scheme is a monthly income investment but with a twist. In the SBI Annuity Deposit, the investor gets a regular monthly income but nothing is paid to the investor on maturity. This is because the lump sum amount deposited by the investor is repaid over a period in equated monthly instalment which comprises part of the principal amount and interest on the reducing principal amount. As part of the principle and interest on reducing principal is paid in installments over a period of time hence at the maturity date, there is no maturity amount remaining to be paid.

In a fixed deposit, you can get monthly, quarterly interest payouts while the principal amount invested is received back by the investor at the end of maturity. In SBI annuity deposit scheme, on investing a lump sum amount, it is repaid to the investor over the tenure selected along with interest, in equated monthly installments. Annuity basically means pension or a regular income for a certain period or for a lifetime.

The minimum deposit amount for the Annuity deposit is based on the minimum monthly annuity Rs 1000 for the relevant period. i.e for 3 yrs, the minimum deposit amount will be Rs 36,000. The Annuity deposit is available for 3 yrs / 5 yrs / 7 yrs and 10 yrs. All resident individual investors including minors can invest in the scheme. The rate of interest will be the same as applicable to Term deposits of tenor as opted by the investor. The senior citizens can avail additional rate of interest on the Annuity Deposit scheme.

For example, using the SBI annuity deposit calculator, you will find that at a 5.3 per cent rate of interest for 3 years, on depositing Rs 1.5 lakh, you will get about Rs 4500 per month for 3 years. On maturity, no amount becomes payable.

One can invest in SBI Annuity Deposit plan through SBI Net Banking but from an account same as in the debit account from which the Annuity Deposit account is funded. The e-Annuity deposit account will be generated in the same name of the account holder as in the account from which it is funded.

The SBI Annuity Deposit plan may suit those looking for a higher monthly income on their deposits, and not necessarily looking at a high-interest rate. Before investing in the SBI Annuity Deposit plan, one may speak to the bank executives to know about other important details including the amount of monthly income arrived at after using the calculator. As the maturity amount is not there in the scheme, it is important you understand the working of the scheme before investing in it.

Source: Financial Express