Fixed Deposit Interest Rates at Lowest Now: How to Get Better Returns Out of Your FD Account?
Fixed Deposit Interest Rates at Lowest Now: How to Get Better Returns Out of Your FD Account?
Over the past few years, banks have relentlessly slashed fixed deposit interest rates, but some of them are now hiking it ti draw more customers

Fixed Deposit Update: The Reserve Bank of India in its Monetary Planning Committee (MPC) meeting this month has decided to keep the repo rates unchanged at 4 per cent in view of the Covid-19 pandemic and the emergence of the Omicron variant in India. This may come as a good news to many, but for some the news might be not all that pleasant. This applies particularly for investors who have fixed deposit accounts at public and private sector banks. The RBI has been maintaining a status quo in the interest rates for over a year now, which has affected those with foxed deposit accounts.

In the past few years, many banks and non-banking finance companies (NBFCs) have also relentlessly cut down the interest rates on fixed deposits (FDs). However, recently, some of them have hiked the rates. HDFC Bank and Bajaj Finance are two such firms that have increased interest on their FD plans.

As of now, the repo rate stands at 4 per cent, while the reverse repo rate stands at 3.35 per cent, RBI governor Shaktikanta Das said on December 8, Wednesday. The MPC also decided to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.

Keeping this in mind, Fixed Deposit account holders have to look at different ways to increase their monthly returns from the accounts. This is what FD investors should do to enhance their income from the accounts:

Short Term Deposit Rates Are Hiked First

FD investors should note that as per records, whenever there is a hike in interest rates, short term or medium term rates are hiked first. For example, HDFC Bank recently hiked interest rates of FD tenures within the range of 7 to 29 days, 30 to 90 days, 91 days to 6 months, 6 months 1 day to less than one year.

Long Term Investments Must be Avoided

Investors who have fixed deposit accounts should not invest in long term policies, according to experts. This is because when you renew your existing FD or invest in a new one, it will be a better option. Investing for a shorter period of time also means that you can avoid locking your money for a long time, which can prove helpful in the current scenario. You can also take advantage of the rate hikes when banks or NBFC s decide to do so.

You may also be levied a penalty if you lock in your amount now and withdraw it before the maturity period only to invest it at a higher interest rate.

Avoid Low Returns by Using the FD Ladder Strategy

Interest rates on fixed deposits have fallen to an all time low at present. However, financial planners have a solution for investors to get the most out of this risk-free form of investment. According to them, investors can levy the FD ladder strategy to get higher returns from their accounts. An FD ladder is made by breaking one big fixed deposit and use that money to invest in multiple short term plans of lower amounts. This ensures that not all your money is locked in together at lower interest rates, while also keeping your average return at a higher amount.

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