Suppose you have P500,000 in extra cash that you want to invest. Where will you place it? The choices are many — bank deposits, mutual funds, stocks, government and corporate bonds, etc. — but choosing which among them is tricky. Which will give the best and least returns? Which is the least and most risky? Deciding will not be easy. But you must be guided by a rule of thumb, that your return must be higher than the inflation rate to offset any erosion in the value of your money. Another option to consider is special deposit account or SDA.
Deposits are your safest bets. They are insured up to P250,000 — and up to P500,000 if initiatives by Congress to raise the maximum deposit insurance coverage prove successful.
However, they offer the lowest return — currently less than 1% per annum — which make them unsatisfactory if you are looking for something higher. The central bank expects inflation to average 5.5% this year.
Fortunately, the Bangko Sentral ng Pilipinas (BSP) opened its SDA to government financial and trust institutions. If you are interested, you may go to a bank that offers the SDA.
The BSP introduced the SDA in 2006 to mop up excess liquidity in the financial system — and counter inflation — without raising its overnight borrowing and lending rates.
You must have at least P100,000, however, before you can place your cash in the SDA. “At present, only the 14-day and 30-day windows are available. This facility is deemed very lucrative because it offers relatively high interest rates and are considered very safe, akin to government securities, because the counter-party is the central bank itself,” said Josefino P. Cerin, Land Bank of the Philippines investment and trading department head.
The SDA offers interest pegged on the central bank’s overnight borrowing rate. As of Dec. 23 last year, the 14-day SDA offered 5.265%, and the 30-day SDA, 5.875%. Interest income, however, is subject to a 20% withholding tax.
The SDA is a secure investment since it is backed by the BSP and offers better rates compared to deposits.
For more information, contact:
Bangko Sentral ng Pilipinas
A. Mabini St. cor. P. Ocampo St., Malate Manila
Phone : (02) 524-7011, Fax: (02) 523-6210
E-mail: bspmail@bsp.gov.ph
Web: www.bsp.gov.ph
See also: How to Invest in SDA
source: Business World Online www.bworldonline.com, photo from article.wn.com
SDA is good for low risk but a BIT higher return than bank deposit. But those banks who have minimum of 1M, is the whole amount covered by insurance or just the 250K?
By the way, @jade jamora, its not unusual that bank personnel don’t know about their product. I heard it everywhere LOL
currently, BPI offers 2.831 % int. rate (net) on SDA. minimum amount is down to 50K. PS bank also offers SDA at 3.5 % int rate net. their minimum required amt is 1M.
i also have a sda now @2.8% net.. and i think it’s the best rate offered compare to TD and other deposit products. i’m just wondering..the article above says the interest income is subject to 20% withholding tax…but upon my computation..the banks charge is 30%.. anybody here knows about this?..or maybe it is based on how much money you invested..
that’s correct not all banks offer this type of deposit and not all bank officials are aware of this. sda is also available at bpi & allied bank. banks offering sda do not advertize this and bank officials who are aware are not telling their clients that it is available with them. you have to establish a good friendly relationship with the bank officials for you to know it.
i have sda in a bank and its yielding high interest and tax free. i came to know about this by “accident” through a slip of the tongue during a friendly conversation with the bank manager.
I’m interested on how to compute the interest earned in bsp-sda. Please show me some solutions.
RE: SDA. Not all banks offer this. Metrobank requires a min. investment of P1M while BPI has the lowest min. requirement which is P100,000.
Even bank officers are not aware of the existent of this product. When I asked about this product, I got confused looks.