The Reserve Bank has once again not made any change in the key rates. This is the 8th time in a row that the rates have remained unchanged. Earlier in May 2020, the repo rate was reduced. Due to this, if you have made or are about to make a fixed deposit (FD) in the bank, then you can make a loss.
The effect of the decision of the Reserve Bank
The impact of the Reserve Bank’s decision on FD interest rates is considerable. If the Reserve Bank had reduced the rates, then your FD would have got less interest. If he had increased the repo rate, you would have got more interest on FD. In fact, both deposits and borrowings are related to each other. That is, when the interest rate on the loan is low, the deposit will also be low. This is because the deposit that the bank takes from you at 5 or 6%, gives you the same money at 7-8% at the time of the loan. This is the main income of the bank. The bank has very little of its own money.
Reserve Bank has maintained the rate as it is
If the Reserve Bank has kept the rates the same, then the interest you will get will also remain the same. Like loans, the interest rates on bank FDs are at a lower level at this time. Some experts believe that the Reserve Bank may increase the repo rate in the coming time.
fix money for short time
If you are planning for a new FD then you should do it for a short period of time. If you have an FD in the past and are renewing, then do it for a short period of time. That is, for 6 months or a year. This is because after that the repo rate may increase. After that you can keep the same money as a new FD.
fix money for different periods
If you want to do FD then you should FD money for this at different times of many years. Suppose you have 1 lakh rupees then you can do it in 4 parts. That is, out of this, 25-25 thousand rupees can be fixed for 1 year, 2 years, 3 years and 4 years. After one year, when the tenure of your deposit is over, you can fix it again for a longer period.
After the completion of two years, you can re-FD the same for 4 years. This means that all your money is not locked for one time at a lower interest rate. With this type of scheme, you can get more interest on the same 1 lakh.
Can fix money for long time also
If you want the money to be deposited in one go for a long time, then you can take a bond for this. The interest rate on the bond remains high anyway. Many banks and non-banking financial companies also offer floating rate fixed deposits. You can watch it too if you want. In such deposits, you have both the advantage and the loss of the rate increase and decrease. Meaning now that interest rates are expected to increase further, then you will get the benefit of it.
Deposit on floating rate
At present, most of the banks are giving interest on FD at 5.40%. In this case, you can get 1 to 1.50% more interest on floating rate deposits. If you are a senior citizen, then you can also take the Reserve Bank’s floating rate bonds. It is currently getting an interest of 7.15%. Its duration is 7 years. Although there are already many schemes of the government for this, on which interest rates are getting higher.
Decision to increase CRR
The Reserve Bank has decided to increase the cash reserve ratio (CRR) anyway. It was increased from 3% to 3.5% in March while it was increased to 4% in May. CRR means the money that banks keep with the Reserve Bank for a day or two.
Can also decide on FD of companies
However, if you do not want to go to the fixed deposits of banks, then you can decide for FD of companies. You get an interest of more than 7% on FDs of companies. In this, from Tata to Birla and other big corporate houses launch bonds. Apart from this, if you want, keep your money in debt funds of mutual funds.
You can take advantage of debt schemes of mutual funds
In debt funds of mutual funds, you get more interest than fixed deposits of banks or companies. Also, if you want, you can tell it to the fund house for Systematic Investment Plan (SIP). Every month a fixed amount of your money will be deducted from this and will continue to invest in SIP. That is, one will get more money than fixed in debt and then in SIP you will get the benefit of the stock market.
