If you’re looking to invest in a fixed deposit (FD), now might be your last chance to lock in high returns. Banks are preparing to lower interest rates, which means FD investors could see reduced earnings. This change comes as a result of the Reserve Bank of India’s (RBI) latest decision, which benefits borrowers but negatively impacts those relying on FDs for returns.
RBI Cuts Repo Rate for the First Time in 5 Years
For the first time since May 2020, the RBI has reduced the repo rate. On Friday, RBI Governor Sanjay Malhotra announced a 0.25% cut. The last time the repo rate was lowered, it dropped by 0.40%.
Just like individuals borrow money from banks, banks also borrow from the RBI. The interest rate at which the RBI lends to banks is called the repo rate. When this rate goes down, banks get cheaper loans, which leads to lower interest rates on various types of loans, including home and car loans. However, it also means lower returns on FDs.
FD Interest Rates Will Drop Soon
With banks getting loans at reduced rates, they will pass on the benefit to customers by lowering loan interest rates. This will reduce EMIs on home loans, car loans, and other borrowings, making repayments easier for millions of people. However, FD investors will feel the pinch, as banks will also lower FD interest rates.
Act Fast: Lock in Higher FD Rates Before They Drop
Now that the RBI has cut the repo rate, banks will soon follow by reducing FD interest rates. If you’re planning to invest in an FD, it’s best to act quickly. Right now, general customers can earn up to 7.30% interest, while senior citizens are getting up to 7.80%. Waiting too long could mean missing out on these attractive rates. Visit your bank as soon as possible to secure the best returns before the rates drop!
