Annuity Deposit Scheme by SBI - Something new in Banking

SBI has come out with a Annuity Deposit Scheme. This is something new (according to me), never heard of this product being launched before (but I could be wrong).

In a nutshell, customer can deposit an amount, similar to FD, the bank will then compute the EMI based on present interest rate and give back every month an installment amount (similar to interest) to the customer. On maturity, the value will be zero. Basically, give back the principal and interest over the tenor of the deposit.

Customer can choose the tenor with max being 10 years. Interest on FD gets locked but given out as an EMI.

This is great for a super senior citizen, wherein the interest payment of the deposit might be insufficient. The only option for such customers will be to put the corpus in SB account and get SB interest rate and take out the monthly expense amount. This product ensure that the customer gets the FD rate and can take out the money every month. Customer, can mix and match their total corpus in such a way that few FD can be on annuity whilst the remaining can be standard FD where principal and interest is given on maturity.

The risk being on maturity, you get nothing unlike FD where the capital is given out. if the customer outlives - well this is a perinial risk.


Interest seems low:

SBI Annuity Deposit Scheme Interest Rates (2023)

Period Interest Rate for General Citizens Interest Rate for Senior Citizens
7 - 45 days 2.90% 3.40%
46 - 178 days 3.90% 4.40%
179 - 364 days 4.40% 4.90%
1 - 2 years 5% 5.50%
2 - 3 years 5.10% 5.60%
3 - 5 years 5.30% 5.80%
5 - 10 years 5.40% 6.20%

SBI is always the lowest with regard to interest rate. I hope other banks copies the product.

Life insurance cos already provide Annuity plans where you pay them a lump sum amount and they pay you pension every month till death.

Yes, this I know. But this is first time a Bank is doing something similar - a modified FD.

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Even in banks when we book an FD, there are options of monthly/quarterly payout of interest.
I don’t understand how this product will be different. Only difference may be we’ll get a part of principal per month

This is the difference and the only difference. You are getting the FD rate for 10 years and you can get a part of principal.