Impact of RBI's Announcements on Fixed Deposit Interest Rates

PUNE, India, April 18, 2020 /PRNewswire/ -- Amidst the second phase of the nationwide lockdown, the Reserve Bank of India (RBI) Governor Shaktikanta Das announced a series of measures to help boost liquidity and ease financial stress. He announced a cut of 25 basis points in the reverse repo rate, thereby bringing the repo rate from 4% to 3.75%. Additionally, he also announced TLTRO (Targeted Long-Term Repo Operations) that would inject around Rs. 50,000 crores of additional liquidity into the banking and financial systems. 

While these measures would help increase availability of credit to end borrowers at competitive interest rates, it may also exert downward pressure on FD interest rates, offered by most financial institutions. 

Thus, investors looking to grow their savings could reap the benefits of higher interest rates offered by most financial institutions, before these rates come down. Last month, the reduction of repo rate by RBI to 4.4% led to a fall in interest rates, and the current announcements may also result in the same. 

Here's a look at some of the best ways for investors to grow their savings by investing in fixed deposit now. 

Choosing the right FD issuer

Amid the present economic turmoil, choosing the right FD issuer is a prerequisite for investors seeking assured returns. In order to reap higher profits, it is advisable to not just look at high interest rates, but also check the background of the financier. Some of the best ways to select an FD issuer include:

• High safety ratings- Investors must choose FD issuers with high safety ratings, from reputable credit rating agencies like CRISIL and ICRA. Bajaj Finance FD is one such credit rating agency, with the highest rating of FAAA by CRISIL and MAAA by ICRA, which indicates highest safety of deposits. Bajaj Finance also has more than 2,50,000 FD customers contributing towards a deposit book of Rs. 20,607 crores. 
• Capital Adequacy Ratio (CAR) - Investors may consider choosing institutions with Capital Adequacy Ratio (CAR) of 18% or more, which indicates whether the institution can meet obligations and improving business, while absorbing losses without having to dilute equity. Bajaj Finance, for instance, has a strong CAR of 25% with liquidity of Rs. 15,800 crores as on March 31, 2020. 
• Net Interest Margin (NIM) - Companies with NIM of 4% or more are safe investment options, reflecting strong financial management. With NIM of 11.08%, Bajaj Finance Fixed Deposit is a great choice for growing savings with fixed deposit. 

Convenient online investment

In today's scenario, it is important to lock in to high FD interest rates immediately, reduction in these interest rates. Thus, it is important to choose issuers offering the convenience of investing in online FD, to lock into interest rates of up to 8.05%, offered by issuers like Bajaj Finance FD. 

Here's an example of how savings grow with this FD, by assuming a minimal investment of Rs. 25,000 for 60 months. 

 *Results generated using FD calculator.

The present investment landscape is rife with risks of loss of principal in the stock market, which is why investors are seeking fixed-income instruments like fixed deposit for growing their savings. However, post RBI's previous announcement, interest rates for PPF and government savings schemes were also brought down. 

The announcement on April 17, 2020 is also likely to result in a reduction of FD interest rates, which makes it important to lock into high rates, as soon as possible. 

About Bajaj Finance Limited

Bajaj Finance Limited, the lending company of Bajaj Finserv group, is one of the most diversified NBFCs in the Indian market catering to more than 36 million customers across the country. Headquartered in Pune, the company's product offering includes Consumer Durable Loans, Lifestyle Finance, Digital Product Finance, Personal Loans, Loan against Property, Small Business Loans, Home loans, Credit Cards, Two-wheeler and Three-wheeler Loans, Commercial lending/SME Loans, Loan against Securities and Rural Finance which includes Gold Loans and Vehicle Refinancing Loans along with Fixed Deposits. Bajaj Finance Limited prides itself on holding the highest credit rating of FAAA/Stable for any NBFC in the country today. It is also the only NBFC in India with the international 'BBB' with stable outlook for long-term, by S&P Global Rating.

To know more, please visit: https://www.bajajfinserv.in