Interest rates in India have peaked out long ago. Key policy rates such as the Repo Rate now stand at 6.5%, and it has remained unchanged since February 2023. In one way, the common man has benefitted from it since banks raised the interest rates on Fixed Deposits (FDs).
But gradually the voice is growing louder to bring down Repo Rate which is likely to push down the interest rates offered by banks on FDs. Therefore, this is the time to park extra cash, which one might now need in the short or medium term, in FDs of long tenure.
Let’s have a look at what interest rates major banks are offering to the retail customer on term deposits, better known as FDs.
SBI FD rates
First, consider what the largest bank in the country is offering. State Bank of India (SBI) is offering 6.5% for normal depositors (those under 60 years) and 7.5% for senior citizens for tenure of 5 to 10 years. Incidentally, 5-10 years is the longest tenure any bank offers on FDs.
HDFC Bank FD interest rates
Now consider HDFC Bank, the biggest private sector bank in India. HDFC Bank is currently offering 7% to the general public and 7.5% to the senior citizens.
ICICI Bank FD interest rates
ICICI Bank has announced that it will pay an interest of 6.9% on FDs carrying tenure of 5 years 1 day to 10 years. Senior citizens will be paid 50 basis points more than this rate.
Axis Bank FD interest rates
For Axis Bank, the rates on 5-10-year deposits are 7% for depositors under 60 and 7.75% for those above 60 years.
PNB FD interest rates
The longest tenure available in Punjab National Bank, or PNB, is 1,896 days to 10 years. The interest rate 6.50% for citizens below 60 years and 7.30% for those above 60.
Kotak Bank FD interest rates
The rates in Kotak Bank for 5-year to 10-year tenure bracket are 6.20% for the general public and 6.70% for senior citizens. But the rates for tenure between 4 and 5 years for general and senior citizens are 7% and 7.60% respectively.
Bandhan Bank FD interest rates
The interest rates in Bandhan Bank are 5.85% for non-senior citizens and 6.60% for senior citizens for tenure between 5 years and 10 years.
Bank of Baroda FD rates
Public sector institution Bank of Baroda offers 6.50% for those below 60 years and 7.50% to depositors above 60 years.
Canara Bank FD rates
Canara Bank offers 6.70% interest to the general public while it rises to 7.20% for citizens above 60 years. These rates are for deposits with tenure between 5 years and 10.
One thing to bear in mind is that these rates apply to deposits below Rs 3 crore.
The bigger picture
The Repo Rate – the rate at which the Reserve Bank lends to commercial banks – stood at 4% in May 2022. But to shrink the supply of money in the system, the Reserve Bank raised it from that level to 6.5% in steps. The last raise came in February 2023 when it was raised from 6.25% to 6.5%.
However, with the country now trying to step up growth rates, clamour is growing for a reduction of the Repo Rate, which will help bring down the cost of capital, that in turn, could raise growth rates in the economy. While growth rates could stimulate employment generation, the RBI is cagey that relaxation of key interest rates could also stoke inflation that would raise distress levels for the common man. Right now it seems that high food inflation is the only obstacle to lower interest rates.
At least two of the members of the six-member Monetary Policy Committee of the RBI that decides on the key interest rates, have supported a reduction of the Repo Rate from 6.5% to 6.25%.
If the Repo Rate climbs down, banks (and NBFCS too) would most likely bring down interest rates they offer on retail term deposits too. Therefore, whoever wants to lock in the high interest rates can think of doing so in the days ahead.
With voices growing for a reduction in key policy rates, interest rates could be heading south this year. This is the time to consider parking funds for the long term in FDs. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
