Is this the right time to lock in high rates in fixed deposits and G-Secs?
- FD interest rates in India have been on an upswing for investors since RBI began hiking the repo rate in May 2022.
Fixed deposit (FD) interest rates in India have been on an upswing for investors since the Reserve Bank of India (RBI) began hiking the repo rate in May 2022. This is important because from an individual investor’s perspective, when the repo rate go up, FD interest rates go up; when the repo rate is cut, interest rates inevitably trend downward. RBI raises the repo rate when it wants to counter inflation. Between May 2022 and February 2023, the central bank raised the repo rate six times, by a cumulative 2.5 percentage points, taking it to 6.5%. The monetary policy committee (MPC) of RBI has not hiked the rate any further in the last 12 months, leading to speculation that we may see a cut in the repo rate and, consequently, interest rates. That raises a pertinent question: is this the right time to lock in rates in FDs and government securities G-Secs?