Will the RBI’s interest rate cut also affect your bank FD?
On 5th December, the RBI reduced the repo rate by 0.25 percent. The Reserve Bank’s Monetary Policy Committee (MPC) meeting began on 3rd December. All six MPC members voted in favor of the proposal to reduce the repo rate by one-quarter percent. The question is, will this affect your bank fixed deposits? Let’s know about it…
The RBI’s interest rate cut won’t have an immediate impact on bank fixed deposits, said Experts. However, its impact could be felt in the medium term. BankBazaar CEO Adil Shetty said, “Over the past few quarters, banks have reduced interest rates on fixed deposits of different tenures. The biggest change has been in the interest rates of two-year fixed deposits. Returns remain attractive only on fixed deposits of certain tenures.”
In February this year, the RBI reduced interest rates for the first time. Since then, banks have significantly reduced FD interest rates. Interest rates have fallen by half to one percent since February. “The interest rate for regular depositors in SBI’s “Amrit Vrisht” has come down from 7.1% to 6.6%. HDFC Bank’s peak interest rate has also come down from 7.1% to 6.6%”, said Saurabh Jain, Co-Founder and CEO, Stable Money.
Many mid-sized and small finance banks have reduced interest rates on some FDs by 1.5 to 2.25 percent. “This indicates that FD interest rates are not only affected by changes in the repo rate, but also by liquidity in the system, competition for deposits, and credit demand”, said Jain. The This RBI’s interest rate cut will boost economic growth. Investors may have to adjust their investment strategies in this environment of interest rate changes.
