
The Impact of RBI’s Interest Rate Changes on Fixed Deposits
Posted on Monday, December 23rd, 2024 | By IndusInd Bank
Summary: RBI’s repo rate directly impacts fixed deposit interest rates. A high repo rate increases the cost of borrowing for commercial banks, leading to high interest rates on both customer loans and deposits. On the other hand, a low repo rate reduces the interest rate on loans and deposits. However, with IndusInd Bank, customers can earn attractive interest rates on fixed deposits, growing their wealth over time. With IndusInd Bank’s FDs, customers can also enjoy other perks like easy online booking, flexible payout options, and tax-saving opportunities.
Fixed deposits (FDs) offer a secure and lucrative investment avenue to grow your wealth without exposure to market fluctuations. Offering assured returns upon maturity, these deposits are insured by the Reserve Bank of India (RBI) up to INR 5 lakhs.
However, fixed deposit interest rates often fluctuate for various reasons, including macroeconomic conditions, market dynamics, inflation rate, and regulatory requirements.
Among these, RBI’s repo rate has the maximum impact on fixed deposit interest rates. Therefore, it is crucial for investors to understand what repo rate means and how it can impact their overall fixed deposit returns.
What is the Repo Rate?
RBI’s repo rate is the interest rate at which the RBI lends money to commercial banks. This rate is regularly adjusted to regulate inflation. For example, if the inflation rate increases, it signals that the country’s demand for goods and services is more than the supply. RBI increases the repo rate to reduce this demand, making it expensive for commercial banks to borrow funds. This leads to a reduced money supply in the economy and thus helps in arresting inflation. On the other hand, when demand is less than supply, the RBI reduces the repo rate to encourage more borrowing and spending. This can boost economic activity. Following the update on February 2024, the RBI’s current repo rate is 6.50%.
Impact of Repo Rate on Fixed Deposits
RBI’s repo rate can directly impact commercial banks’ fixed deposit interest rates. When the RBI raises the repo rate, banks face higher borrowing costs. To attract more deposits, they increase FD interest rates. Higher FD rates encourage more people to save, improving the bank’s liquidity. In simpler terms, a higher repo rate often translates to higher fixed deposit interest rates.
However, a lower repo rate reduces the cost of borrowing for banks, which often leads to lower interest rates on loans and deposits. This encourages customers to take loans due to lower borrowing costs while offering less attractive returns on fixed deposits.
Benefits of Opening a Fixed Deposit with IndusInd Bank
With the repo rate remaining unchanged, now is the perfect opportunity for investors to invest in fixed deposits. Here are some attractive FD benefits offered by IndusInd Bank:
1. Hassle-Free Instant Booking
Open your FD online with IndusInd Bank in just three easy steps. All you need are your PAN and Aadhaar card details for a quick and seamless account opening process.
2. High-Interest Rates
Enjoy competitive interest rates to maximise your returns and grow your funds securely.
3. Flexible Renewal and Interest Payment Options
Opt for the auto-renewal feature to let your deposits grow beyond maturity. Additionally, you can choose from multiple interest payout options—monthly, quarterly, or at maturity—based on your financial needs.
4. Instant KYC Completion with Video KYC
Complete your KYC instantly with IndusInd Bank’s Video KYC feature. Book an FD seamlessly without visiting a branch.
5. Tax Saver FD
Lower your tax obligations while growing your wealth. Invest in a fixed deposit with a 5-year lock-in period and enjoy tax benefits under Section 80C of the Income Tax Act.
Grow Your Wealth with IndusInd Bank
RBI’s repo rate has a direct impact on fixed deposit interest rates. With the rate remaining unchanged, investors can capitalise on this opportunity to build long-term wealth.
Moreover, with IndusInd Bank’s fixed deposits, you can earn high interest rates, make hassle-free online bookings, and enjoy flexible interest payout options. Visit IndusInd Bank’s official website to open an FD online today.
Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.