SBI reinvestment plan: works like a regular FD but with a twist


oi-Vipul Das


From zero balance savings account to a variety of loan programs, India’s largest lender, SBI offers a range of products to its clients. Although the State Bank of India (SBI) offers a plethora of fixed deposit systems such as Term Deposit, Tax Savings Fixed Deposit, SBI Multi-Option Deposit, SBI Annuity Deposit, and Reinvestment Plan . Among these fixed deposit options, the fixed deposit of the SBI reinvestment plan works like a regular term deposit system, but with one variation. Interest on an SBI reinvestment plan is only paid when the plan matures, and not on a regular basis during the deposit period. Standard interest rates for term deposits are applied to the principal amount and compound interest is determined and then paid to the depositor. So without wasting any time, let’s find out about this plan in brief.

Characteristics of the SBI reinvestment plan

Characteristics of the SBI reinvestment plan

  • Individual residents, individually or jointly, minors (either individually or through their guardians), HUF Kartas, businesses, businesses, local communities and government departments are eligible for this program.
  • This special deposit comes with a minimum deposit period of 6 months up to a limit of 10 years.
  • This program is available at all SBI branches in India.
  • This pattern can be opened by making an initial contribution of Rs. 1,000 / – and subsequently in multiples of Rs. 100 / -.
  • There is no upper limit on the maximum deposit.
  • The interest rates of the SBI reinvestment plan are the same as the rates for term deposits, with a quarterly composition. At maturity, the accumulated interest rate and the principal amount are paid to the depositor. The interest rate will be 0.50% or 1% below the rate applicable at the time of deposit for the term of the deposit with the bank, or 0.50% or 1% below the contractual rate, depending on the lower of the two.
  • However, no interest will be paid on deposits kept for less than 7 days.
  • A deposit of Rs 2 Cr will be treated as a bulk deposit under this scheme.
  • If no indication of maturity is given, SBI automatically renews its FD reinvestment plan.
  • A nomination facility is also available under this scheme.
  • The bank branch will not pay cash for the term deposit with interest of Rs. 20,000 / – and above.
  • The plan / account can be transferred from one branch to another.
  • The early withdrawal option is available. The penalty for premature withdrawal on a fixed retail deposit (FD) up to Rs 5 lakh is 0.50%. A 1% penalty is applied to retail fixed deposits over Rs 5 lakh but less than Rs 1 crore.
  • For an SBI Reinvestment FD Plan, tax is withheld at source. If the 15G / 15H form is not submitted, TDS is deducted at the prevailing income tax rate.
  • At 1.00% above the STDR (Special Term Deposit Rate), a FD SBI Reinvestment Plan offers a loan or overdraft facility up to 90% of the deposit amount including accrued interest.
Loan facility

Loan facility

Customers can take out a loan or overdraft of up to 90% of their deposit plus interest, at a rate of 1% higher than the fixed deposit interest rate. With the following applicable margin, a loan against deposit is allowed:

Duration of deposit Margin
Up to 36 months 5%
Over 36 months and up to 60 months ten%
Over 60 months 15%
Source: SBI

4 Risks of investing in term deposits

SBI reinvestment plan interest rate

SBI reinvestment plan interest rate

SBI’s reinvestment plan is similar to term deposits, except that by receiving interest regularly during the deposit period, you will receive the interest payment at maturity. Regular interest is applied to the principal, and compound interest is determined and paid at maturity.

Mandate Regular FD rate in% FD rate for seniors in%
7 days to 45 days 2.9 3.4
46 days to 179 days 3.9 4.4
180 days to 210 days 4.4 4.9
211 days to less than 1 year 4.4 4.9
1 year to less than 2 years 5 5.5
2 years to less than 3 years 5.1 5.6
3 years to less than 5 years 5.3 5.8
5 years and up to 10 years 5.4 6.2
Source: SBI, Wef 08.01.2021

Article first published: Wednesday, June 9, 2021, 9:37 a.m. [IST]

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