Search in Indianmoney's WealthPedia

Home Articles Is It Better To Invest In a Fixed Deposit?

Is It Better To Invest In a Fixed Deposit? Research Team | Posted On Friday, August 10,2018, 05:28 PM

5.0 / 5 based on 1 User Reviews

Is It Better To Invest In a Fixed Deposit?




The increase in repo rate in India, brought smiles on the faces of many risk-averse investors who invest in fixed deposits, recurring deposits, and other traditional investments. The bond yields are primary indicators of a change in interest rates. For the past many months interest rates on 10-year government securities has been steadily rising.

Bond yields have increased from 6.675% to 7.75% in the past year and G-Sec yields could soon cross 8%. Therefore, it is safe to say that banks will increase fixed deposit rates in the coming days.

Want to know more on Fixed Deposit? We at will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.


You May Also Watch:


Iframe Content


Is it Better To Invest In a Fixed Deposit?


The last time Reserve Bank of India (RBI) went for back-to-back repo hikes in the bi-monthly policy meet was way back in 2013. The RBI has hiked the repo rate from 6% to 6.5% in the last two bi-monthly policy meets. The repo rate in India now stands at 6.5%. Earlier, RBI had hiked the repo rate from 6% to 6.25% on June 6th 2018.

The triggers for the back-to-back repo rate hike are mainly rising oil prices and inflation. In May 2018 retail inflation was 4.9% which rose to 5% in June 2018. Increasing fuel prices and food items contributed to an increase in inflation. Also, an increase in the minimum support price (MSP), trade war and 7th central pay commission’s house rent allowances (HRA) had a significant impact. How will this impact common people like you and me? The increase in repo rate has an impact on both borrowers and depositors.


Repo Rate:


Repo rate is the rate at which the RBI lends to commercial banks. The increase in the repo rate means the RBI charges a higher rate of interest to commercial banks. Banks in turn charge higher interest to borrowers.

While an increase in repo rates is bad news for borrowers, it can be good news for depositors. Increase in repo rate leads to an increase in interest rates on both, loans and deposits.


Impact of hike in repo rate on fixed deposits:


As repo rates rise, banks offer higher interest to depositors. Therefore, an increase in repo rates will not only hike interest rates on loans, but it will also lead to a hike in interest offered on Fixed Deposits, Small Saving Schemes and so on. SBI has already increased fixed deposit rates by 10 basis points on July 31st 2018, even before the hike in repo rate was declared. This will benefit senior citizens who live on interest income. Thus, interest rates on Fixed Deposits and Small Savings Schemes will increase.

After the first repo rate hike in June, two more increments in repo rate were anticipated. This prompted lenders to raise rates.


SEE ALSO: What is a Corporate Fixed Deposit?


Impact of hike in repo rate on loans:


Loans are bound to get costlier with the hike in repo rate. After the first repo rate hike in June, banks like SBI increased their MCLR. Most other banks followed.


Be Wise, Get Rich.

What is your Credit Score? Get FREE Credit Score in 1 Minute!

Get Start Now!
Get It now!

This is to inform that Suvision Holdings Pvt Ltd ("") do not charge any fees/security deposit/advances towards outsourcing any of its activities. All stake holders are cautioned against any such fraud.