SBI Accounts: How Fixed Maturity Plan (FMP) Compares With Fixed Deposit (FD)
State Bank of India (SBI), country's largest lender, provides a wide range of deposit schemes for investors. Fixed deposit (FD), one such product offered by the lender, grants assured returns. In a SBI FD account, depositor can park lump sum amount and avail features like choice of interest payout and liquidity through overdraft (OD) or premature withdrawal, according to SBI's website- sbi.co.in. SBI also allows customers to invest in fixed maturity plans (FMPs), which is a fixed tenure mutual fund scheme. (Also read: Fixed Deposit Interest Rates Of Key Lenders Compared)
Here are key things to know about fixed maturity plan (FMP) and fixed deposit (FD):
Investment and returns
Fixed maturity plan (FMP), that comes with a stipulated maturity period, invests the corpus in debt instruments maturing in line with the tenure of the scheme, according to SBI's mutual fund website- sbimf.com. They are open for subscription only during a specified period at the time of launch. FMPs generate returns that are equivalent to the yield of securities with similar maturities prevailing on the date of the investment.
SBI FDs, on the other hand, allows an investor to park his or her money until a specified maturity date. The interest rate is decided at the time of opening of the FD account. So, the depositor is aware of the maturity value at the time of investment only. The following FD interest rates are applicable on deposits below Rs 2 crore, according to sbi.co.in:
| Tenors | Revised For Public w.e.f. 22.02.2019 | Revised for Senior Citizens w.e.f. 22.02.2019 |
|---|---|---|
| 7 days to 45 days | 5.75% | 6.25% |
| 46 days to 179 days | 6.25% | 6.75% |
| 180 days to 210 days | 6.35% | 6.85% |
| 211 days to less than 1 year | 6.4% | 6.9% |
| 1 year to less than 2 year | 6.8% | 7.3% |
| 2 years to less than 3 years | 6.8% | 7.3% |
| 3 years to less than 5 years | 6.8% | 7.3% |
| 5 years and up to 10 years | 6.85% | 7.35% |
| (Source: sbi.co.in) | ||
Tenure
The tenure of an FMP can vary between a few months to a few years. The tenure of fixed deposit varies between 7 days and 10 years, according to SBI's website.
Taxation
FMPs offer indexation benefit, which means that one can get higher returns after paying tax. The returns one get from FMPs are called capital gains. In case of FDs, the interest income is added to the investor's income and is taxable at the applicable tax slab.
Premature withdrawal
The investment is locked-in for the specific period in case of SBI's FMP. While in case of FD, SBI offers a premature withdrawal facility. For fixed deposits up to Rs 5 lakh, the penalty for premature withdrawal is fixed at 0.50 per cent for all tenors, according to SBI's website. For FDs above Rs 5 lakh but below Rs 1 crore, the applicable penalty is 1 per cent for all tenors.