FD INTEREST RATES TREND IN INDIA 2014

Presented By: BankBazzar.com

• Bank fixed deposits or commonly known as FD's continue to be one of the most popular investment options in the country. From the masses to the high risk taking investor and from corporate to salaried professionals, just about everyone keeps some part of his or her investment portfolio for fixed deposits.

• The intrinsic advantage of secured returns at better interest rates than savings bank accounts make fixed deposit one of the most widely used investment vehicle.

• In recent years however the popularity of fixed deposits has diminished somewhat as rising inflation and falling interest rates have meant people have not been able to attain any advantage for parking their funs in a bank fixed deposit scheme.

BANKS FREE TO FIX THEIR FIXED DEPOSIT RATES

• In the last twenty years, bank fixed deposit interest rates have had a roller coaster ride. From the highs of 12% in 1991 and 1992 to the lows of 4 to 5.25% in 2003, bank fixed deposits have seen it all.

• The Reserve Bank of India has deregulated FD interest rates allowing the banks to fix their interest rates as per their plans. This is the reason different banks have different rate of interest for fixed deposits for various tenure periods.

• The overall dependency in how banks fix their FD interest rateshowever depend on RI's repo rate and reverse repo rates announcements as they link bank's financial profitability.

FLUCTUATION OF FIXED DEPOSIT INTEREST RATES• Banks fix their fixed deposits interest rates in accordance with RBI’s

repo rate policy.

• The RBI governor Raghuram Rajan has left the repo rates unchanged in the quarterly meeting held in the first week of June as decrease in inflation has triggered a positive impetus in the overall financial market.

• Banks fixed deposit rates have been steady so far in the year 2014. The next quarterly evaluation of the country’s economic health is likely to showcase the path for increase or decrease in FD interest rates.

• A weak monsoon may trigger higher inflation which may force the RBI governor to alter repo rates. On the other hand if inflation remains under control the RBI governor can keep rates unchanged or even reduce the rates which may auger ell for fixed deposit account holders.

FIXED DEPOSIT RATES FOR POPULAR BANKS (AS ON JULY 2014)

Bank Name Tenure Interest Rate

State Bank of India 1 year 9% Quarterly compounding

Central Bank of India 1 year 8.5% Quarterly compounding

Standard Chartered Bank 1 year 9% Quarterly compounding

HDFC Bank 1 year 8.75% Quarterly compounding

ICICI Bank 1 year 8% Quarterly compounding

• The interest rate for fixed deposit accounts can be higher or lower depending on the term or tenure of deposit. In addition to above mention interest rates, almost all banks offer an additional interest rate of 0.25 to 0.50% for senior citizens willing to invest in fixed deposit accounts. Smaller banks including cooperative banks usually offer a slightly better rate of interest as they have low overhead costs compared to large private and public sector banks.

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