Reserve Bank of India (RBI) increased the repo rate by 25 basis points, resulting in it rising to 6.50%. fresh steps are expected costly borrowingLeading to higher Equated Monthly Installments (EMI).
Repo rate is the rate at which RBI lends money to commercial banks.
However, with an increase in the repo rate, interest rates on deposits like fixed deposits (FDs) also increase.
While this may bring the burden of higher EMIs for borrowers, some believe it may bring good news for silent savers who want to invest in FDs.
Akshar Shah, founder, Fixed, a recently launched investment platform for fixed income products, said, “We expect banks to gradually increase deposit rates over the next quarter, as they look to attract durable liabilities. Let’s focus on.”
Even before today’s announcement by RBI, some banks have recently increased their FD rates.
Jana Small Finance Bank, one of the small finance banks in India, has also announced an increase in interest rates on Regular Fixed Deposits with effect from February 1, 2023 and FD Plus with effect from February 6, 2023.
Read also: EMI likely to increase by 2-4% post RBI rate hike; What should home loan borrowers do?
The bank has increased the interest rate on regular fixed deposits from 7.85% to 8.10%. The interest rate on FD Plus (non-callable) has been increased from 7.85% to 8.25%.
Bandhan Bank had increased the interest rate on fixed deposits on January 5, 2023. A day earlier, on January 4, Kotak Mahindra Bank had increased interest rates for the tenor by up to 50 bps.
Several other public and private sector banks and NBFCs had announced a hike in FD interest rates in January.
IndiaFirst Life Insurance CIO Poonam Tandon said, “We may see an increase in FD rates by banks, especially as it is the last quarter of the year. Also with surplus liquidity being low, we can expect more banks to hike FD rates.
With the increase in the repo rate, the interest charged by banks and NBFCs that offer FD products is also likely to increase.
The central bank raised the repo rate five times by 225 basis points to a total of 6.25% in 2022.
Several banks including HDFC Bank, PNB and ICICI Bank had increased their interest rates on fixed deposits as well as loans.
PNB announced a hike in interest rates for savings accounts and fixed deposits on January 1. The public sector lender raised interest rates on fixed deposits by up to 50 basis points for multiple tenures.
Interest rates on fixed deposits below Rs 2 crore in PNB (per annum) with effect from January 1, 2023:
1 year: For general public – 6.75%; For senior citizens – 7.25 percent
More than 1 year to 665 days: For general public – 6.75%; For senior citizens – 7.25 percent
HDFC Bank interest rates on fixed deposits below Rs 2 crore (per annum) with effect from January 24, 2023:
1 year to less than 15 months: For general public – 6.60%; For senior citizens – 7.10%.
15 months to less than 18 months: For general public – 7.00%; For Senior Citizens – 7.50%
Interest rates on fixed deposits below Rs 2 crore in ICICI Bank (with effect from December 16, 2022):
1 year to 389 days: For general public – 6.60%; For senior citizens – 7.10 percent
390 days to less than 15 months: For general public – 6.60%; For Senior Citizens – 7.10%
15 months to less than 18 months: For general public – 7.00%; For Senior Citizens – 7.50%.
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