The Reserve Bank of India (RBI) is set to review its monetary policy on April 9, which may lead to a rate cut. This could result in fixed deposit (FD) rates declining, reducing returns for new depositors. Currently, many banks are offering FD rates between 7% and 7.75%, particularly for senior citizens. However, if the RBI initiates a rate cut, banks may reduce their FD rates to adjust to the change.
The time it takes for banks to reflect the rate cut in their FD rates varies depending on factors such as their liquidity, credit demand, competition, maturity profile of existing FDs, and interest rate expectations. Some banks may adjust their rates within days of the RBI’s move, while others may take longer, spreading the changes over a few weeks. A full transmission of the rate cut throughout the banking system could take up to two months.
Adhil Shetty, CEO of BankBazaar.com, believes that the upcoming RBI monetary policy review is likely to result in a rate cut, leading to banks trimming their FD rates soon after. As the rate cut filters through the system, the attractive FD rates currently on offer may not last long. In light of this, individuals considering opening a fixed deposit account may want to act quickly to secure the current rates before they decline.