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The account can be opened jointly by up to three adults. (Representative Image)

One of the things uppermost in the mind of most when they start earning is saving, and the topmost concern when some start investing is securing the future. For a large number of people in this country, investing means putting money in guaranteed-income instruments, which automatically leads them to post office schemes and public sector banks.

Though the interest rate has been falling during most parts of this century and is set to slide further, many still refuse to trust anything else with their hard-earned money other than fixed-income products.

A look at the mid-tenure schemes like 5-year FDs, the rate of interest payable by banks usually vary between 5.4-5.5% but the post office still offers 6.7% interest.

It means if an individual is investing Rs 5 lakh for 5 years in a PSU bank, one would get an interest income of Rs 1.54 lakh. But the same money put in a post office would earn Rs 1.97 lakh on maturity that is a straight extra amount of Rs 43,000.

If you are a senior citizen, the rate of interest you would get in post office is 7.4% that would entitle you to a maturity value of Rs 2.21 lakh if you invest Rs 5 lakh for 5 years. But a PSU bank would offer a senior citizen Rs 5.9-6.1%, who would invest the same amount for the same time window. In a post office scheme, an individual can earn at least Rs 50,000 more.

The National Savings Certificate (NSC), one of the instruments sold through the post office, pays 6.8% for a 5-year period. This would give one almost Rs 2 lakh extra for a corpus of Rs 5 lakh to all investors. Kisan Vikas Patra (KVP) doubles your money in 124 months, translating into 6.9% YoY yield.

On the other hand, a 120-month FD in State Bank of India offers 5.4% interest. Other public sector banks generally offer in the range of 5.3-5.6%.

Significantly, the minimum investment in these KVP and NSC schemes is Rs 1,000 and investors can add in multiples of Rs 100 with no upper limit. The returns are fixed for the tenure of the deposit.

In 5-year FDs and Senior Citizen Savings schemes the interest rates are compounded quarterly, but in KVP and NSC the interest rates are compounded annually.

“Interest rates are on a downward trajectory and it is a matter of time before they are brought down further. Investors should make basic calculations before making investment decisions,” said Arvind Agarwal, a personal finance expert.

Though they offer lower interest rates, banks still attract a lot on investments in FDs simply because of ease to transaction, said experts.