Now banks have also started increasing the interest rates on FDs and other deposits due to fewer deposits as compared to loans.
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Interest rates: After the RBI hiked the repo rate, most of the banks showed speed in raising interest rates on loans but did not show enthusiasm for increasing the rates on deposits. According to the latest report by Bank of Baroda, the share of mutual funds and equities in total financial investments increased to 6.3% and 1.9% during 2021-22 as compared to 2.6% and 1.1% respectively in FY 2019-20. While the share of bank deposits declined from 34.4% to 25.5% during this period.
Now banks have also started increasing the interest rates on FDs and other deposits due to fewer deposits as compared to loans. Due to this, investors in particular debt mutual funds are returning to FD.
INTEREST ON FD INCREASED LONG AFTER REPO RATE HIKE
As of September 2022, the growth of funds managed by mutual funds assets under management (AUM) as compared to bank deposits was only one-third. Comparing bank FDs as a safe investment with debt mutual funds, by March 2022, while the growth of bank FDs was 8.9%, debt funds declined by 7%. In April-September, the AUM of debt mutual funds declined by more than 14%, while that of term deposits increased by 2.5 to 3 per cent.
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INTEREST ON SMALL SAVINGS SCHEMES ALSO INCREASED
After the increase in the repo rate, the government increased the interest on many small savings schemes of the post office on October 1. The interest rate on the 2-year time deposit was increased from 5.5% to 5.7%. The interest rate on a 3-year time deposit was increased from 5.5% to 5.8%. The interest rate on Senior Citizen Savings Scheme has been increased from 7.4% to 7.6%. At the same time, the monthly income account scheme is now getting 6.7% annual interest.
