RBI's repo rate cut may impact fixed deposit interest rates
What's the story
The Reserve Bank of India (RBI)'s Monetary Policy Committee (MPC) has started an interest rate cut cycle by slashing the repo rate by 25 basis points.
This is usually followed by a similar cut in both loan interest and deposit rates.
Consequently, current fixed deposit (FD) rates may soon see a dip, possibly affecting those looking to invest in FDs.
Rate forecast
Current FD rates may be highest for near future
The upcoming cut in FD interest rates indicates that the existing rates could be the highest, investors will witness in the near future.
This could lead potential depositors to open new FDs before the rates fall.
Preeti Zende, a SEBI-registered investment advisor and founder of Apna Dhan Financial Services, noted, "FDs are one of the most favorite investment products for retail investors due to their assured return and safety."
Bank rates
Top banks' current FD interest rates
HDFC Bank is offering 7.4% interest on FDs for a tenure of four years and seven months to general citizens, 7.9% to senior citizens.
Federal Bank offers a competitive 7.5% on its fixed deposits of 444 days to general citizens and 8% for senior citizens, since January 10, this year.
More rates
Other banks' FD interest rates
Kotak Mahindra Bank offers 7.4% interest on FDs for 390-391 days to general citizens, and 7.9% to senior citizens.
SBI offers 7% interest on FDs for two-three year tenures to general citizens, and 7.5% to senior citizens.
Bank of Baroda offers 7.15% interest to general citizens and 7.65% to senior citizens on FDs for two-three year tenures, while Union Bank of India offers a competitive 7.3% to depositors for 456 days and 7.8% to senior citizens.
Investment advice
Zende advises caution while investing in FDs
Despite the attractive rates, Zende advises investors to be cautious before locking a major chunk of their money in FDs.
She warns that "FDs are taxable and in the long run, they fail to generate inflation-hedged return."
This highlights the importance of careful financial planning and asset allocation to meet individual financial goals.