RBI rate cut: Before banks cut rates, lock your FD at 8%

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Published: March 28, 2020 6:32:25 PM

As the economy comes to a standstill following the nationwide lockdown to contain the spread of COVID-19, the RBI has announced massive liquidity boosting measures.

Coronavirus outbreak, Novel Coronavirus COVID-19, lockdown, Reserve Bank of India, RBI, RBI policy rates, repo rate, reverse repo rate, cash reserve ratio, CRR, fixed deposit, FD, FD rates, rate cutsDue to the cut in the repo rate, banks will now be persuaded to lend at lower rates of interest.

As the economy comes to a standstill following the nationwide lockdown to contain the spread of Novel Coronavirus COVID-19, the Reserve Bank of India (RBI) has announced massive liquidity boosting measures, including cuts in the repo rate, reverse repo rate and Cash Reserve Ratio (CRR).

With a 75 bps cut in the repo rate to 4.4 per cent and a 90 bps cut in the reverse repo rate to 4 per cent, both borrowing and lending rates are likely to be cut by banks sooner or later.

With the key policy rates coming down well below 5 per cent, the repo-linked lending loan rates and fixed deposit rates would also be cut substantially.

Due to the cut in the repo rate, banks will now be persuaded to lend at lower rates of interest and this will put more money in the hands of people. On the other hand, the cut in the reverse repo rate will also make it unattractive for banks to passively deposit funds with the RBI and instead lend it to the productive sectors like industry and agriculture.

Before the rates slump, you have an opportunity to earn up to 8.25 per cent per annum by investing in Jana Bank FD for 1555 days. On the same FD, senior citizens will get up to 8.75 per cent for around next 4.3 years.

WATCH VIDEO: What is Repo Linked Lending Rate, Home Loan? RLLR meaning, comparison vs MCLR

With the equity markets rocked by high volatility due to the lockdown, creating havoc in economy with airlines, railways and roadways services completely shut, along with the production activities in most factories, except for the providers of some essential services, it would be a good opportunity to invest in the FD as the economy would take a long time to recover.

The following table shows the rates offered by Jana Bank on FDs of various tenures:

^FD Plus with No Premature Withdrawal Interest Rate (p.a) on deposit of > Rs 15 lakh.
^^Regular FD Interest Rate (p.a) on deposit of < Rs 2 crore.
^^^Senior Citizen FD Interest Rate (p.a) on deposit of < Rs 2 crore.

Apart from Jana Bank, some other banks/companies currently offering high interest on their FDs are Fincae Small Finance Bank 9 per cent, Sriram City 9 per cent and Mahindra Finance 8.45 per cent.

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