SBI FD interest rates: SBI raises FD interest rates by up to 20 bps for these maturities

RBI raises its repo rate

The repo rate has now been raised by 0.50% by the RBI at its monetary policy meeting on June 8, 2022, bringing the total hike to 0.9% in just 36 days. This evidently indicates that the best days have now arrived for fixed deposit (FD) investors, who have seen FD interest rates fall by 40% over the past six years from the all-time high of 9% offered by SBI in September 2014 to 5.4%. in May 2020.

Top FD bank senior 2 years

Here are the top banks offering the highest interest rates for senior fixed deposits (FD) for a two-year term. (Rates are in effect as of June 9, 2022)

Bandhan Bank, DCB Bank, IndusInd Bank and RBL Bank offer an interest rate of 7% to their senior customers. These interest rates are compounded quarterly and Rs 10,000 will increase to Rs 11,488.82. IDFC First Bank is offering an interest rate of 6.4% and Rs 10,000 will rise to Rs 11,376.39 within two years.

Should you book long-term FDs after current rides?

While a rate hike is good news for depositors, it also raises a host of questions. Despite the fact that interest rates are now moving in the opposite direction, no one knows where they will eventually peak or how long it will take. If you wait longer to book your FD at a higher rate, you’ll lose out on current rising rates, and if you book long-term FD after just a few rate hikes, you risk losing if rates continue to rise. increase in the future.

Should we wait for rates to cross 7-8% to book long-term FDs?

If you are trying to book a long term FD or a large FD that needs to be renewed, now may not be the best time. In a rising rate environment, it is best to invest in short-term FDs so that you can benefit from rising rates during the investment period. Therefore, booking an FD for 6 months to a year might be a better option. You can book longer term FDs whenever those FDs come due and you get a better rate on renewal.

How to adjust your FD scale in the current situation

It is better to create an FD ladder as it can be a viable alternative as it allows you to split a large deposit into multiple parts and reserve each part after a certain time to get the average return and periodic liquidity when rates drop. interest are volatile. However, it is essential to select the correct duration and frequency of deposition. In a rising rate environment, keeping the duration and spread between deposits short is essential to ensure that the deposit benefits from rapidly rising rates at maturity. To build a stable scale, gradually increase these tenors.

If you have Rs 10 lakh, you can open Rs 2.5 lakh FD for six months, Rs 2.5 lakh FD for nine months, and so on. When your first FD matures, you can extend the term to two years, and when your second FD matures, you can extend the term to two years and three months, and so on. Increase the duration to 3 years and the gap between the two DFs to 9 months once these DFs begin to mature.

What is an FD?

A fixed deposit, often referred to as FD, is a type of investment instrument offered by banks and non-bank financial institutions (NBFCs). You invest for a certain period of time and also receive a fixed rate of interest with FDs, you will also receive fixed returns regardless of how interest rates fluctuate or how the economy performs at the time of the investment. investment.

Banks offering the best rate on 5-year FDs

DCB is offering the best rate for 5 year fixed bank deposits, from now on it is offering 6.60 and the compounded quarterly return of 10,000 will be Rs 13872.27. Indusind Bank offers 6.50% and a quarterly compound return of 10,000 will be Rs 13,804.20. RBL Bank offers an interest rate of 6.30% and a quarterly compounded return will be Rs 13,669.00. IDFC First Bank and Karur Vysya Bank offer interest rates of 5.25% and 5.89 with quarterly compound returns of Rs 13635.39 and 13336.47 respectively. (These interest rates are in effect as of June 9, 2022.)

Create an FD scale

Spread the amount of your FD over several years. Investment in FDs should be done in a “laddered” manner to minimize reinvestment risk and ensure liquidity. Instead of reserving a large long-term FD, you divide it into several parts when making an FD scale. In a ladder, the amount is divided into smaller FDs, which are then counted one by one after an interval of 3 to 5 years, from the first to the last. With such a large spread between first and last, your chances of getting the best rate on your FD will be high.

Covered by DIGCC

Every customer of the bank is eligible for insurance up to a maximum of Rs 5,00,000 for principal and interest amounts held in the bank if the banking license is canceled or in liquidation as per the insurance company deposits and credit guarantee (DIGCC).

Go for Sweep-in FD

Excess money in the savings account is automatically transferred to fixed deposit whenever the amount in the savings account exceeds the specified limit. Your savings account balance will earn a higher interest rate than if it were in a regular savings account.

According to HDFC Bank, “When you apply for the swipe facility, what the bank is really doing is it is dividing the units of the specified FD into units of Rs. 1. By doing so, it is ensuring that the funds are available in your savings accounts or checking accounts, whichever is linked. Thanks to this, checks or any other debit transactions in your account are not hindered due to a lack of sufficient funds in your savings/checking account.

Kudos to FD investors as RBI raises rates again

Good days have finally arrived for fixed deposit (FD) investors, as banks and other financial institutions have started to raise FD interest rates, albeit slightly.

Impact of RBI rate hike

A 90 basis point hike in the FD interest rate from 5.5% to 6.4% means that on every 1 lakh rupee FD for 5 years, you will end up getting an additional interest payment of Rs 5,958.

Long Term vs. Short Term FD

Usually, it is the long-term FD that may see a higher increase in interest rates compared to the short-term at this point. As the interest rate increases, we will continue to see these DFs offering better rates.

Is the FD scale a good option now?

Making an FD ladder helps you to divide a large deposit into multiple parts and reserve each part after a time interval to get the average return and periodic liquidity in case of interest rate volatility. One can very well follow this concept for their provident funds if they keep them parked in the bank account or FDs.