Fixed Deposit Update: Reserve Bank of India In its Monetary Planning Committee (MPC) meeting this month, it has decided to keep the repo rates unchanged at 4 per cent in view of the COVID-19 pandemic and the emergence of the Omicron variant in India. This may be good news for many, but it may not be all that pleasant for some. This is especially applicable for investors who have fixed deposit accounts in public and private sector banks. RBI has been maintaining status quo in interest rates for over a year now, which has had an impact on people with fake deposit accounts.
Over the past few years, several banks and non-banking finance companies (NBFCs) have also made consistent cuts. Rate of interest On Fixed Deposit (FD). However, recently, some of them have hiked the rates. HDFC Bank and Bajaj Finance are two such companies that have increased the interest on their FD schemes.
On Wednesday, December 8, RBI Governor Shaktikanta Das said that as of now, the repo rate is 4 per cent, while the reverse repo rate is 3.35 per cent. The MPC decided to continue with the accommodative stance for as long as necessary to revive and sustain growth on a sustainable basis and to continue to mitigate the impact of COVID-19 on the economy, while ensuring ensure that inflation remains within the target going forward.
Keeping this in mind, fixed deposit account holders need to look at different ways to increase their monthly returns from the accounts. To increase their income from the accounts, FD investors should:
Short term deposit rates are raised first
FD investors should note that as per records, whenever interest rates rise, short term or medium term rates are first hiked. For example, HDFC Bank has recently increased the interest rates for FD tenures ranging from 7 to 29 days, 30 to 90 days, 91 days to 6 months, 6 months to 1 day to less than one year.
Long term investments should be avoided
According to experts, investors who have fixed deposit accounts should not invest in long term policies. This is because when you renew your existing FD or invest in a new one, it will be a better option. Investing for a short period of time also means that you can avoid locking your money for a long time, which can prove to be helpful in the current scenario. You can also take advantage of rate hikes when banks or NBFCs decide to do so.
If you lock your amount now and withdraw it before the maturity period to invest only at higher interest rate, you may also be penalised.
Avoid Diminishing Returns Using FD Ladder Strategy
The interest rates on fixed deposits have come down to the lowest level at present. However, financial planners have a solution for investors to make the most of this risk-free form of investment. According to him, investors can apply FD ladder strategy to get higher returns from their account. An FD ladder is created by breaking up a large fixed deposit and using that money to invest small amounts in several short-term schemes. This ensures that all your money is not locked at once at low interest rates, while also maintaining your average return on a higher amount.
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