Why it is a good time to lock your money in fixed deposits

If you wanted to invest in fixed deposits (FDs), but have not been able to do so in the past for some reason, it is about time you took some action now. This is because, most experts believe that rates will start falling in the near future. But, the good news now is that at least four banks have increased their deposits rates on FD across various tenures.

Take for instance, Corporation Bank, just this week introduced a new deposit scheme, effective 7 January, wherein you would get an interest rate of 9.10 percent per annum, for a tenure of 555 days. This rate is higher than the bank’s rate of 8.75 percent for deposits between 12 months and 2 years. See new rates here.

[caption id=“attachment_582530” align=“alignleft” width=“380”]  Corporation Bank introduced a new deposit scheme wherein you would get an interest rate of 9.10 percent per annum. Moneycontrol.com[/caption]

In December, Federal Bank had raised its deposit rates for deposits with 91-119 days tenure form 7 percent to 7.50 percent while rates on above 1-3 year tenure were raised from 8.75 percent to 9 percent. See new rates here.

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Dena Bank also increased its rate on select deposits around the same time in December. The changes were made to deposits with tenure of 365 days and above and those with tenures 1 year to less than two years. The rates were increased from 8.75 percent to 9.10 percent. But, as per the bank’s website, the new rates effective from 8 January for the same tenure show that the rate is 9 percent, a reduction of 10 basis points.

So, before, other banks too start cutting rates, this may be a good time to get locked in at higher rates.

Jai Adiani, founder and chief certified financial planner, said, “If you are looking for debt instruments, this is a good time to get locked into higher rates in FD. The RBI’s policy at the end of the year definitely does not signal a rate hike.” Most experts expect the central bank to cut rates to during January-March.

Among these banks, as per an Economic Times report, published today, Axis Bank, increased its rates for FD form 9 percent to 9.25 percent for deposits between Rs 1-5 crore with tenures between 18 months and five years.

So, depending on your investment horizon, getting locked in at high rate FD now could be a good idea.