Bank fixed deposits, also known as fixed deposits, are one of the most popular investment products in our country. Bank FDs are preferred by investors of all ages as they are considered safe and can be easily liquidated whenever needed. Fixed deposit (FD) investors saw their returns decline during the last 2 years amid the COVID pandemic, but the situation is improving now. With Reserve Bank of India (reserve Bank of IndiaBanks are also expected to pass on the benefits to the customers. Whenever policy rates start rising, banks start increasing interest on FD rates.
How can FD investors get maximum benefits?
Amit Gupta, MD, SAG Infotech says that if you are looking to book FDs for a long term or a large FD is up for renewal, this may not be the right time to do so. “If you want to book an FD for a longer tenure, you may not want to book a longer FD or renew a larger FD at this point in time. Long term rates should not be locked now. Currently, galloping inflation will lead to an increase in the front loaded rate. Hence, taking a short-term auto-renewing FD of around 6 months would be ideal,” said Amit Gupta.
If you have the flexibility, six months to a year is ideal, he said. When you have to choose a tenure, I suggest one year. Considering we are in a rising interest rate environment, a higher overall yield can also be achieved by splitting it into two 6 month FDs with rollover option.
TradeSmart President Vijay Singhania says RBI is increasing repo rates, but fixed deposit rates are not moving forward. Lending rates, on the other hand, have kept pace with the repo rates. Most banks have hiked interest rates by 20-30 basis points, which is much lower than the repo rates.
According to Vijay Singhania, investors can start locking at least part of their investment in fixed deposits for the time being. The next decision may be taken after the decision of the Monetary Policy Committee which can give us a better idea of the interest rate trajectory.
Will FD rates cross the 7% mark?
Some economists believe that there is still room for an uptrend. So, if this is the case, the FD rates may cross the 7% mark.
“Although the RBI has said that inflation has moderated and rates may not rise at the same pace as before, some economists feel that there is still room for an upside. If that is the case then we can come close to the 7 per cent mark on the repo rates. In that case banks can increase fixed deposit rates by 30-40 basis points,” Vijay Singhania said.
“Most banks have hiked their deposit rates by 20-30 basis points after the repo hike. Depositors can expect a further 40-50 bps hike in the rate over the next few quarters, even if all of it is not broadcast. This will bring the figure closer to 7%,” said Amit Gupta.
Best FD rates offered by these banks
IDFC First Bank offers Highest FD Interest Rate 6.25% per annum which is for general public with tenure of 5 years and above. The second highest interest rate is 5.75% per annum which is offered by Axis Bank and HDFC Bank for tenures of 5 years and above. The third highest interest rate being offered is 5.60% p.a. which is offered by IDBI Bank for tenures of 5 years and above.
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