Fixed deposit interest rate: The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) has decided to keep policy rates unchanged in the face of the Covid-19 pandemic and uncertainty over the Omicron variant. For many, that would be a relief as interest rates on loans would remain unchanged for now, especially as everyone tries to recover from the devastating second wave and more than two years of the pandemic. However, some would be disappointed as the central bank would maintain the status quo on interest rates, holding them at 4 percent for more than a year now. One of these groups would be investors who have placed their money in term deposit accounts.
As the RBI refrained from raising rates, several banks and non-bank finance companies cut interest rates on term deposits. Investors are worried about their money as yields have not kept pace with inflationary trends.
For now, the repo rate stands at 4%, while the repo rate stands at 3.55% after the last MPC meeting on December 8. The political panel has also maintained its accommodative stance for as long as necessary to revive and support growth. sustainably in the economy while reducing the impact of the Covid-19 pandemic and subsequent lockdowns, while inflation remains a concern.
Given this scenario, here is what fixed deposit investors can do to increase the monthly returns on their accounts:
Short term FD rates are increased first
Usually, it is short- or medium-term deposits that benefit from a rise in interest rates. As in the case of HDFC Bank, interest rates on term deposit accounts have been increased for terms of 7-29 days, 30-90 days, 91 days to 6 months, 6 months 1 day less. ‘a year.
Avoid long-term investments
Investors should try not to lock their long term money into a term deposit account. That way, they can take advantage of rate hikes from banks or NBFCs, when they occur. A penalty is usually imposed if you withdraw the investment amount before the maturity date, which can adversely affect the returns on your investment.
Use the FD scaling strategy to avoid low returns
Although FD interest rates are at their lowest, financial planners suggest that using the FD scale strategy can help investors achieve higher returns. An FD ladder is created by breaking a large fixed deposit and using the proceeds to invest in short term plans of lower denominations. This ensures that only a portion of your money gets stuck in lower interest rates, but you get a higher average return amount.
Never miss a story! Stay connected and informed with Mint. Download our app now !!