Will RBI’s Status Quo on Repo Rates Impact FD returns?

Will RBI’s Status Quo on Repo Rates Impact FD returns?

The Reserve Bank of India has maintained a status quo on repo rate and reverse repo rate today at MPC meet. In previous two consecutive monetary policy meets the benchmark rates were slashed by total of 250 bps, following which banks were constantly slashing lending rates and returns on Fixed Deposits at the same time.

Owing to the pause on repo rates, we can hope that further south turn on fixed deposit should stop now. It certainly should be a good news for Fixed Deposit investors.

Likewise this could also result in pause in fall of lending rates on loans. Since March 2020, most banks have slashed Home Loan Interest Rates by 70-110 bps.

The falling rates regime had left the investors of small saving schemes little choice. Not only fixed deposit rates, the returns on other government backed fixed-return schemes were also slashed.

Amidst prevailing market volatility, many people prefer to invest in bank FDs over equities as they promise fixed returns. Particularly the senior citizens will take a sigh of relief with stable FD rates.

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