Bank fixed deposit interest rates start seeing a dip; how to select FD tenure now for maximum returns
FD interest rates. The Reserve Bank of India (RBI) paused the benchmark repo rate for the third consecutive time in the August Monetary Policy Committee (MPC) meeting. Further, the decision to withdraw Rs 2,000 notes from circulation created surplus liquidity in the banking system and helped in keeping in check the rise in interest rates on FDs.
With the dream run of interest rate hikes on FDs almost coming to an end, how should you invest in FDs now?
Why banks are reducing interest rates on FDs As retail inflation had dropped below the central bank’s upper threshold of 6 per cent in April, May and June, the RBI put a brake on repo rate hike. This was the third time that the RBI maintained a status quo in the key lending rates this year. This move came after a series of hikes in repo rate, by overall 250 basis points from 4 per cent to 6.5 per cent, within a short span of 11 months.
The possibility of any further repo rate hike in the near future is very unlikely. «Further, a stable repo rate seems to be on the cards for the foreseeable future,» says Mayank Bhatnagar, Chief Operating Officer, of FinEdge.
The withdrawal of Rs 2,000 notes from circulation has strengthened liquidity in the banking system. The cooling of bond yields over the last few months has also impacted deposit rates.
