Time to invest in fixed deposit (FD)? Interest rate hike possible, says SBI research report

If you are one of those traditional investors who invest in fixed deposits (FD), then there is good news for you. According to the SBI Research report, there will be strong pressure on bank deposit rates to rise if some numbers bear fruit in the 2022-2023 financial year.

“In FY22, small savings collections far exceeded the budgeted amount 2 lakh crores, and this had resulted in net borrowing below $1.7 million. The challenge lies in fiscal year 23, with net borrowing increasing by 4.1 lakh crores and small savings said to be lower by 1.7 lakh crores than the revised FY22 amount. If these figures in FY23 materialize, there will be strong pressure on bank deposit rates to rise as small Savings rates are already much higher than bank deposit rates,” SBI Research said in a report.

The report titled “20bp Rise in Non-MPC Repo Rate” is authored by Dr. Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India.

The government has not revised the rates for small savings plans since the first quarter of FY21.

“To protect the interests of small depositors during the pandemic, the government has not revised the rates for small savings schemes since the first quarter of FY21. However, RBI has reduced the key policy repo rate by 115 basis points to 4.0% and repo rates reversed by 155 basis points to 3.35% Thanks to this, banks have also significantly reduced their interest rates (both on deposits and on loans),” the report said.

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SBI Research Report

Recently, lenders like SBI, HDFC Bank, Axis, and Kotak Mahindra Bank raised their fixed deposit rates for multiple terms.

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