India’s largest bank, State Bank of India (SBI), has made an important change to its Multi Option Deposit (MOD) scheme, which could impact crores of customers.
From now on, to take advantage of this scheme, you must maintain a minimum balance of ₹50,000 in your savings account.
Earlier, this minimum balance was ₹35,000, so customers now need to keep ₹15,000 more in their account to be eligible.
This update may be challenging for customers with smaller balances, but those who maintain higher balances can continue to benefit from the scheme and earn better returns.
What Is the MOD Scheme and How Does It Work?
The MOD scheme is a special feature that links your savings account with fixed deposit (FD) benefits. Here’s how it works:
If your savings account balance crosses ₹50,000, the extra amount is automatically converted into an FD.
The money is moved into FDs in multiples of ₹1,000.
You earn FD interest rates, which are higher than regular savings account rates.
If your account balance drops and you need money, the bank automatically breaks the FD in parts and transfers the amount back to your savings account.
Senior citizens get additional interest benefits on MOD balances.
This gives customers the flexibility of a savings account while earning higher returns like a fixed deposit.
Impact of the Rule Change
This change will affect different customers in different ways:
Customers who kept a balance between ₹35,000 and ₹50,000 will no longer qualify for the MOD benefits.
This could feel like a missed opportunity, as the scheme was a simple way to earn more interest.
However, customers with balances above ₹50,000 will still enjoy all the benefits.
The scheme remains a great blend of flexibility and returns for those with higher account balances.
SBI made this move as part of its strategy to manage deposit costs, aiming to avoid converting smaller savings into fixed deposits.
While this may discourage some small account holders, it helps the bank control its interest expenses.
What Should You Do?
If you want to benefit from SBI’s MOD scheme:
Plan to maintain a balance above ₹50,000 in your account.
Consider the scheme if you’re looking for a safe way to earn more than regular savings interest.
Consult a financial advisor before making any decisions, especially if your savings pattern may not support a higher balance.
