No repo rate cut: Lock in fixed deposits now to maximise returns

For those holding fixed deposits, this is an ideal time to lock in high interest rates, as rates may decline in the coming months

The Reserve Bank of India (RBI) has maintained the repo rate at 6.50%, unchanged since April 2023. This decision continues to benefit fixed deposit (FD) investors, who can take advantage of the prevailing high interest rates. Locking in deposits now allows investors to secure attractive returns over the long term.

  

What should investors do?

 

Investors should consider short- to medium-term fixed deposits to maximise returns while taking advantage of the current rate environment. This strategy is particularly prudent if a rate cut is anticipated in the near future. 

“"FD investors should make calculated decisions based on the current and expected interest rate environment. From next year, the repo rate may begin to decline if inflation moderates, a goal the RBI is working hard to achieve," said Adhil Shetty, CEO of Bankbazaar,” said Adhil Shetty, CEO of Bankbazaar.

 

 

Vivek Iyer, Partner at Grant Thornton Bharat, believes the RBI is unlikely to cut rates in February due to persistently high inflation risks. "What happens after that remains uncertain. It’s advisable for investors to consider fixed deposits with maturities of 4 to 6 months," he suggested.

 

"Inflation risks need not only to decline but also to remain sustainably low for the RBI to consider a rate reduction or an accommodative stance. This process will likely take at least 4 to 6 months," Iyer added. 

Read LIVE updates on RBI MPC Meeting

   

Shetty recommends FD investors to:

 

Lock in current rates for long-term stability: Current FD rates are attractive but have plateaued. If inflationary pressures persist, locking in long-term FDs ensures predictable returns.

 

Consider short-term FDs: For those expecting rate hikes in the near future, short-term FDs provide flexibility to reinvest at potentially higher rates.

 

Diversify for inflation-adjusted returns: High inflation erodes real returns from FDs. Pair FDs with other investments, such as inflation-indexed bonds or mutual funds, to protect your portfolio.

 

Compare rates across banks: Different banks offer varying FD rates. Shop around to find the best rates for your investment horizon.

 

Here are the current Fixed Deposit (FD) interest rates, according to Paisabazaar:

 

Small Finance Banks

  1. Equitas Small Finance Bank:  Highest - 8.25% (888 days),  

1-year: 8.10%, 3-year: 8%, 5-year: 7.25%.

  2. NorthEast Small Finance Bank:  Highest - 9% (546 to 1111 days),  

1-year: 7%, 3-year: 9%, 5-year: 6.25%.

  3. Suryoday Small Finance Bank:  Highest - 8.60% (Above 2 to 3 years),  

1-year: 8.05%, 3-year: 8.60%, 5-year: 8.25%.

  4. Ujjivan Small Finance Bank:  Highest - 8.25% (12 months)  1-year: 8.25%, 3-year: 7.20%, 5-year: 7.20%.

  5. Unity Small Finance Bank:  Highest - 9% (1001 days)

1-year: 7.85%, 3-year: 8.15%, 5-year: 8.15%.  6. Utkarsh Small Finance Bank:  Highest - 8.50% (2-3 years; 1500 days)

1-year: 8%, 3-year: 8.50%, 5-year: 7.75%.

 

Private Sector Banks

  1. Bandhan Bank:  Highest - 8.05% (1 year),  

1-year: 8.05%, 3-year: 7.25%, 5-year: 5.85%.

  2. City Union Bank:  Highest - 7.50% (333 days)

1-year: 7%, 3-year: 6.50%, 5-year: 6.25%.

  3. CSB Bank:  Highest - 7.75% (401 days),  

1-year: 5%, 3-year: 5.75%, 5-year: 5.75%.

  4. DBS Bank:  Highest - 7.50% (376-540 days)  

1-year: 7%, 3-year: 6.50%, 5-year: 6.50%.

  5. DCB Bank:  Highest - 8.05% (19-20 months)

1-year: 7.10%, 3-year: 7.55%, 5-year: 7.40%.

  6. IDFC First Bank:  Highest - 7.90% (400-500 days)

1-year: 6.50%, 3-year: 6.80%, 5-year: 6.75%.

  7. IndusInd Bank:  Highest - 7.99% (1 year 5 months)

1-year: 7.75%, 3-year: 7.25%, 5-year: 7.25%.

  8. Karur Vysya Bank:  Highest - 7.60% (760 days)

1-year: 7%, 3-year: 7%, 5-year: 7%.

  9. Karnataka Bank:  Highest - 7.50% (375 days)

1-year: 7.25%, 3-year: 6.50%, 5-year: 6.50%.

  10. RBL Bank:  Highest - 8.10% (500 days)

1-year: 7.50%, 3-year: 7.50%, 5-year: 7.10%.

  11. SBM Bank India:  Highest - 8.25% (Above 18 months to less than 2 years 3 days)

1-year: 7.05%, 3-year: 7.30%, 5-year: 7.75%.

  12. Tamilnad Mercantile Bank:  Highest - 7.60% (300 days)

1-year: 7%, 3-year: 6.50%, 5-year: 6.50%.

  13. YES Bank:  Highest - 7.75% (18-24 months)  

1-year: 7.25%, 3-year: 7.25%, 5-year: 7.25%.

 

Public Sector Banks

  1. Canara Bank:  Highest - 7.40% (3-5 years)

1-year: 6.85%, 3-year: 7.40%, 5-year: 6.70% 

2. Central Bank of India:  Highest - 7.45% (444 days) 

1-year: 6.85%, 3-year: 6.75%, 5-year: 6.50%.

  3. Punjab & Sind Bank:  Highest - 7.45% (555 days)

1-year: 6.30%, 3-year: 6%, 5-year: 6%.

 

RBI MPC decision in December

 

RBI’s Monetary Policy Committee (RBI MPC) has decided to keep the repo rate unchanged at 6.5 per cent for the 11th consecutive time, Governor Shaktikanta Das announced on Friday. The committee met from December 4 to 6