The Buyt Desk
Fixed deposit, i.e., FD, is the haven for low-risk appetite investors for the secured return it offers. But despite being a safe option, it has disappointed investors by offering low returns in the last couple of years. It resulted in FD becoming a worthless option to address inflation. Investors started opting for other investment products despite knowing the attached risks such as stocks, mutual funds, NPS, etc.
To address high inflation in India, the Reserve Bank of India has increased the repo rate four times lately, which has allowed banks to pass on the benefits to FD customers as well. All the banks in India, irrespective of their size, have raised the FD interest rates. The move has brought the average interest rate on FD in the year 2022-2023 to 7.0% for three years of tenure. For senior citizens, it is 0.75% extra.
The spike in FD interest rates has pulled the investors’ attention once again. And the poor performance of mutual funds in the last few years has added fuel to it. However, the question will we see more interest hikes by RBI final? Will the FD rates increase further in the coming weeks or decrease? Should you wait, or is it the right time to invest?
The interest rate of banks at the current time is the highest in the past two years. With that, a question arises, is it the right time to invest in FD, or should you wait for further spikes?
The experts in the industry say investors should wait for some more time to get better rates. Here are the facts to support this view.
Inflation is still on the higher side. The RBI will probably increase the repo rate further by February to address high inflation. It will help banks to increase the FD interest rates and benefits customers.
They also believe that considering the present economic conditions of the country, RBI will not decrease the repo rate. This means there will not be any cut in the FD interest by banks.
Thus, if you have not parked your money in the FD yet and looking forward to doing it, you can wait till February.
Furthermore, investors should also consider non-banking finance companies that offer better returns than banks to get better returns. Example: The non-financial organizations such as Bajaj Finance, Mahindra Finance, HDFC, and Shriram Finance have interest rates between 7.44 to 8.00 % for the same tenure that leading banks offer.
