While it will take some time to have any impact on the interest rate on long-term FDs, the short-term and mid-term FDs are the ones that are expected to see the impact much quicker.
FD Investors Alert: With the Reserve Bank of India (RBI) announcing the repo rate cut by another 25 basis points (bps) to 6 per cent. This is the second consecutive cut in key rates after the meeting of the Monetary Policy Committee (MPC). Earlier to this, it had slashed interest rates by 25 bps in February. This was the first cut by the central bank since May 2020. After the latest rate cut, interest rates of home loans and others are expected to come down further. However, this is also expected to bring down the interest rates of fixed deposits.
Further Rate Cuts Expected
It is important to understand that RBI has also changed its policy stance to “accommodative” from “neutral”. This indicates the possibility of more rate cuts in future. If this happens, the interest rates on fixed deposits are expected to drop further.
Impact On Short And Mid-Term FDs Expected Soon
While it will take some time to have any impact on the interest rate on long-term FDs, the short-term and mid-term FDs are the ones that are expected to see the impact much quicker.
Many banks have already started reducing the FD rates after RBI cut the repo rate in the last monetary policies. Several major banks like HDFC Bank, YES Bank, Bandhan Bank and others have reduced interest on FDs recently. Other banks are also expected to follow the same route.
What Should FD Investors Do?
It is high time for those having surplus funds lying around to book fixed deposits now. As the banks are reducing the interest rates, it is advisable to lock into higher rates available now. Some banks have already closed certain special FDs that were offering high interest rates.
Investors must act quickly if they want to take advantage of the highest FD interest rates available. Also, some small finance banks offer higher returns on fixed deposits. But investors must be very cautious while investing with these institutes.
