BoB SDP versus mutual fund SIPs: Which investment plan offers higher returns? Here's a reckoner

Bank of Baroda (Bank) has designed the BoB SDP (Systematic Deposit Plan), a recurring deposit scheme, to offer competitive and assured returns, flexibility and financial security to individuals. The product reflects the Bank’s commitment to providing innovative and accessible savings solutions to customers with an opportunity to earn a higher rate of interest and build a sizeable corpus through regular savings every month.

BoB SDP can help build a sizeable corpus to meet your financial goals and can be considered an integral part of one’s overall asset allocation, per the press release.

Unlike a regular Fixed Deposit, customers do not need to make a lump sum deposit. Contributions are made in monthly instalments and the depositor can choose from a range of tenures starting from 6 months to 10 years.

With monthly contributions starting at Rs 50 for rural and semi-urban areas and Rs 100 for urban and metro regions, the Bob SDP aims to make savings a habit for a wider population. Senior citizens receive an additional interest rate of up to 1% depending on the tenure of the SDP, thus further incentivizing regular savings and giving them a robust option to grow their post-retirement corpus.

What sets BoB SDP apart?
One of the distinguishing characteristics of Bob SDP is that the rate of interest is locked for the entire tenure opted for by the customer, even though contributions are made monthly.  

To give an example, if a customer has opted for a 2-year SDP in September 2024, as per the current interest rates, the customer will earn an interest rate of 7% p.a. (7.50% p.a. for senior citizens) on all the 24 contributions, even though each successive outgo made by the customer is for a progressively shorter period of time, thereby giving customers the twin benefits of higher interest rate and liquidity at the same time. Hence, the last installment is made only for 1-month but continues to earn 7.00% p.a. (while the current ROI for a 15-45 days fixed deposit is 4.50% p.a. only). This is a significant advantage for bob SDP depositors, per the release.

In addition, what sets this plan apart is the value-additions it provides. Customers can take advantage of loan and overdraft facilities of up to 95% of the deposited amount, ensuring liquidity in times of need without sacrificing their savings.
 
Further, interest is compounded quarterly and credited on maturity, boosting the overall returns for depositors. Hence, depositors also benefit from compounding gains as quarterly interest payout leads to higher annualized yield at the end of the tenure.

BoB SDP offers customers a scheme that promotes a regular savings habit, with the potential to earn higher interest on deposits and the flexibility to choose one’s preferred monthly amount and tenure, per the release.