Fixed deposits provide investors with an excellent opportunity to earn the highest return among all risk-free investment opportunities. Having a safety net like this is not only helpful in case of contingencies but in building retirement corpus as well.
However, the current economic conditions of the country, along with monetary and fiscal policy, have made a considerable impact on the Fixed Deposit rates.
On March 27 2020, RBI declared a rate slice for the Reverse Repo Rate by 75 premise focuses which presently remains at 3.75%, while Repo Rate is 4.40%. The banks followed the suit and bit by bit diminished Fixed Deposit loan costs. The significant purpose for this rate slice is to support up the economy by expanding the income.
Money related markets have gotten profoundly unstable because of the COVID-19 flare-up. Frenzy sell-offs and wealth annihilation in Indian markets are lining up. So accordingly, RBI and the central government are taking measures to keep monetary markets from freezing up because of illiquidity.
Apart from this current pandemic situation, following are the reasons why and how Fixed Deposit rates change over time:
Fiscal Deficit and Government Debt
When the Government buys more securities, banks are injected with more money than they can use to lend, implying Fixed Deposit rates to fall. On the contrary, when the government sells securities, money is lost from banks meaning that there is less funding at banks to lend, forcing the rise in interest rates.
Another factor in deciding Fixed deposit rates is inflation. Fixed Deposit interest rates are directly proportional to the inflation level implying higher the inflation rate, higher the interest rate. This happens because lenders want higher interest rates to compensate for the purchasing power of future payments.
The central bank
Banks reduce deposit rates when there is no relief in credit growth. On the other hand, when demand for credit is high, banks raise Fixed deposit rates as they need more money to lend.
In contrast to tight liquidity, banks do not have to focus on retail fixed deposits for their needs when there is sufficient liquidity and banks have to turn to their own deposits.
Additional Read: Investing in Fixed Deposits? Know These Facts
Demand and supply
Less demand for credit implies a reduction in fixed deposit rates. Conversely, if there is a high demand for credit, banks will raise FD interest rates. Banks usually reduce rates by lowering the debt rate.
Calculation of your FD interest amount
Now, how can you know your FD interest amount? Since there are so many factors which affect the changes in interest rates, you need an accurate calculation method which not only saves your time but also gives the exact data. To make the process of calculating your Fixed Deposit return easier you can use Bajaj Finance’s Fixed Deposit Rate Calculator.
What is it?
It is an online tool for calculating how much you earn by investing in Fixed Deposit (FD) during maturity. This online tool uses inputs such as deposit amount, FD tenure, and fixed deposit rate for a given term.
How can this help?
With the help of an FD calculator, you can differentiate the FD interest rates offered by different banks & NBFCs. You can easily comprehend which bank provides the best interest on tenure chosen by you and thus make sure you get the best out of it. An FD calculator would not only help you in saving time but would also help you plan efficiently by knowing your exact returns.
How to use it?
Using an online FD calculator is very simple. Just follow these 5 quick steps to find your earned interest:
- Choose your customer type, i.e. New Customer / Existing Loan Customer / Senior Citizen
- Select the type of Fixed Deposit you want, ie cumulative or non-cumulative
- Select the amount of your fixed deposit
- Select the preferred term of fixed deposit
You will then automatically see the amount of interest earned and the total amount earned at maturity. Using Bajaj Finance FD Calculator is a great way to determine your returns before you invest. This will help you to streamline your finances easily and increase the return on your investment.
Fixed deposits provide investors with an excellent opportunity to earn the highest return among all risk-free investment opportunities. Having a safety net like this is not only helpful in case of contingencies but in building retirement corpus as well. However, the current economic conditions of the country, along with monetary and fiscal policy, have made a considerable impact on the Fixed Deposit rates. Apart from this current COVID-19 situation, following are the reasons why and how Fixed Deposit rates change over time:
- Fiscal Deficit and Government Debt
- The central bank
- Demand and supply
Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.