In its first monetary policy meet after the Union Budget 2023, the Reserve Bank of India (RBI) has hiked the repo rate by 25 basis points. So, this will definitely bring cheers to the fixed deposit investors as very soon the banks will start passing on the benefits to the customers in terms of hike in deposit rates
Amit Gupta, MD, SAG Infotech said that it will be closely scrutinised to see how much the banks increase their FD rates after the policy rate hike in February.
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“It’s indeed accurate that an increase in bank lending rates will have a direct impact on both bank depositors and new loan borrowers. Banks raise the interest rate on their consumer loans following an increase in the repo rate, and they often extend the loan’s term rather than increasing the monthly EMI after the loan interest rate hike,” stated Gupta.
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Best time to invest in FDs
“We reiterate our view that this is the good time to invest in Fixed Income schemes as the yield curve is attractive across maturities. Investors may invest in Liquid and Low duration category at the short end of the curve and in Medium to Long duration category at long end of the curve as per investors’ risk appetite,” said Marzban Irani, CIO- Debt, LIC Mutual Fund
RBI repo rate hike: Good news for FD investors
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Archit Gupta, Founder and CEO, Clear said that this is indeed a good news for fixed deposit investors as banks will raise deposit rates.
“The rate of deposit would also get increased by some margin, making the FDs more attractive and providing a source of fixed income. Due to this more people would be inclined to invest in the FDs thereby creating a shortage of free floating money in the market. This would in turn curtail the expenditure done by the retail customers of the banks,” stated Gupta.
Latest bank FD rates
Currently, the top banks, such as State Bank of India (SBI), Axis bank, HDFC, ICICI and Kotak Bank, offer an interest rate in the range of 3% – 6.35%. For a tenor of 2 years, the interest rate of SBI FDs is 6.75%, Axis bank FDs is 7.26%, HDFC bank FDs is 7%, ICICI bank FDs is 7%, and Kotak bank FDs is 6.75%. However, IDFC First Bank and IndusInd Bank offer interest rates at 7.5% for 2 years FD.
RBI MPC raises repo rate by 25 bps to 6.5%
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The Monetary Policy Committee (MPC) of the Reserve Bank of India decided to raise the key benchmark interest rate by 25 basis points to 6.5 per cent on Wednesday. Four out of six members of MPC have decided to go ahead with this hike in the repo rate, RBI Governor Shaktikanta Das said on Wednesday.
Shaktikanta Das-headed Monetary Policy Committee (MPC) started its three-day meeting on February 6 amid the rate hiking spree that started in May last year to check inflation.
The central bank increased the important benchmark interest rate (repo) by 35 basis points (bps) in its review of the country’s monetary policy in December, following three consecutive rises of 50 bps.
