Falling of Interest rates of Fixed Deposits by R.B.I. ? Know it from Nationlearns.

By | July 4, 2020

Most of the banks offer lower interest rates on Fixed deposits(FDs). As RBI cutting the Rate, interest rates on Fixed Deposits are falling. Recently the rate cuts have been performed by the RBI, as the falling interest rates on fixed deposits have made the investors back down from investing in Fixed Deposits. Some of the Banks in India are still offering as high as 8%. Few banks are offering 6 % on the account balance above ₹1 lakh rupees.

At the end of May, Kotak Mahindra bank cut its rates of saving accounts from 4.5% to 4% for the accounts who has balance more than ₹1 lakh. And from 3.75% to 3.5% for those saving accounts whose balance is less than ₹1 lakh. In April, the State Bank of India has also cut the rates by 2.75% on all its Saving Accounts. So based on the Investment period or tenure, many banks are offering very few incentives to the investors to deposit their money in FDs.

Every bank needs deposits, and those deposits will help banks to provide various loans. Therefore, to be able to propose new types of loans, banks need to keep making fresh deposits. To attract new and fresh deposits, few banks will provide you more interest than other authorized and established banks.

Sweep-in Deposits:

It is a part of a fixed deposit that linked to your specific bank’s savings account. Consider if you have ₹10,000 in your savings account and ₹1 lakh in your Sweep-in Fixed Deposit, and for some emergency or some reason you have to pay a bill of ₹15,000, then the additional ₹5,000 will be a sweep in your savings account from Fixed Deposit. You can transact it easily. The interest rate will apply to such premature withdrawal based on the amount and tenure for which the FD has maintained.

We need to understand that all types of savings and investments have risks. For Higher rewards, one should take Higher risks. If you are an investor who prefers lower returns with known risks or a Senior Citizen, then there is nothing to get disappointed. If you are not a Risk-averse looking for better returns, then you still have better options in  FD. But before that, you still need to understand the essential aspects of interest rates. In more established banks, the risks are lower due to low NPAsDue to Lower risks, these banks provide lower returns. You might not be able to withdraw your deposit amount if those banks undergo moratorium.

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