Will Fixed Deposit rates rise further? Will FD rates cross the 10% mark? These are some of the questions in the minds of many bank customers. The last six months have been good for depositors, especially senior citizens, interested in bank fixed deposits. Several banks have announced higher FD rates in this period.

Two small finance banks are even offering up to 9.5% and 9.6% interest to senior citizens respectively. The FD rate hike has coincided with RBI increasing the repo rate till it hit a pause in April.

The RBI’s decision to pause the repo rate hike and subsequent fall in inflation indicate that the FD rate hike cycle may be over for now. However, several bankers feel differently. They believe that there is still a possibility of further FD rate hikes.

One of the biggest reasons why further rate hike is expected is that the current FD interest rates, in most banks, are still around 20 BPS lower than the pre-pandemic level. (Read more details here)

In a detailed report recently, The Financial Express quoted many banking sector experts as saying that there was still room for deposit rate hikes. Following is a summary of what they said.

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SBI Chairman Dinesh Kumar Khara said that the bank has raised the interest rate in the last six months and, going forward, it will continue to follow the same strategy to “take care of depositor interest”.

Krishnan Sitaraman, senior director and deputy chief ratings officer at Crisil, also said that there was some room for deposit rates to increase.

Virat Diwanji, group president and head of consumer bank, Kotak Mahindra Bank, said that any institution in need of higher liabilities may play around with a higher deposit rate as it is linked to the demand-supply gap.

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IDBI Bank deputy managing director Suresh Khatanhar said the deposit rate increase has not fully come in, yet and banks will also look to raise money through bulk deposits and certificates of deposits.

How much hike is possible

According to bankers, the extent of the FD rate hike would be minimal as the repo rate hike cycle is near its peak. This means the highest fixed deposit interest rate may not cross the 10% mark.

In line with what experts believe, the HDFC Bank this week announced new special deposit schemes with higher interest rates.