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RBI Repo Rate Hike: What It Means For Your Fixed Deposits
- •The Reserve Bank of India has increased the repo rate by 25 basis points, signaling higher future interest rates for fixed deposits.
- •Banks are not expected to raise FD rates immediately as they typically take time to adjust following monetary policy changes.
- •Investors are advised to split their funds across various tenures to avoid locking in money at lower rates for the long term.
- •Existing FDs will continue to earn the same interest rate at which they were originally booked until maturity.
- •Experts recommend tracking FD maturities so they can be renewed at higher prevailing interest rates in the future.
Key Questions Answered
Existing fixed deposits will continue to earn the exact same interest rate at which they were originally booked. Savers should monitor their FD maturity dates so they can renew each deposit at the prevailing higher interest rate when the time comes.
Banks typically require some time to adjust their deposit rate structures following policy rate changes. Although a repo rate hike increases funding costs and encourages banks to compete for deposits, larger banks usually adjust their rates gradually over the coming months.
Investors can split their funds across fixed deposits of varying tenures to avoid locking in their entire capital for a long term all at once. Before opening new FDs, investors should compare interest rates offered by different banks and NBFCs, including special schemes for senior citizens.
