Reason Behind Possible Reduction in FD Interest Rates Revealed

In recent times, both private and government banks have been observed increasing interest rates on Fixed Deposits (FDs) for their customers.

Fixed Deposit schemes have traditionally been a preferred and convenient method of saving and investing.

However, experts now suggest that following the Reserve Bank of India’s decision to phase out ₹2,000 notes, banks may also reduce the interest rates offered on FDs.

The Impact of Depositing ₹2,000 Notes

Experts opine that the depositing of ₹2,000 notes in banks has resulted in an increased cash influx.

According to a State Bank of India (SBI) report, considering that some notes were already held by banks in currency chests, it is expected that bank deposits could witness a substantial rise of at least ₹2 lakh crore.

This surge in deposits might subsequently affect the interest rates on FDs in the future.

Insights from Financial Experts

Vineet Khandare, Founder and CEO of MyFundBazaar, has expressed to News18 that if the influx of cash continues in the upcoming months, FD interest rates could be reduced.

Typically, when the demand for loans rises, banks often increase the interest rates on FDs. However, the significant deposit of ₹2,000 notes has resulted in a considerable cash influx for banks.

₹1.8 Lakh Crore in ₹2,000 Notes Already Deposited

According to the Reserve Bank of India (RBI) Governor Shaktikanta Das, around ₹1.8 lakh crore worth of ₹2,000 notes have already re-entered the banking system through deposits and exchanges.

As the banking sector adjusts to the influx of cash, it is anticipated that the interest rates on FDs may undergo a reduction in response to the changed circumstances.

Customers and investors should stay informed about these developments to make informed decisions regarding their savings and investments.

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