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Do fixed deposit rates keep changing? If so, how often?

By Finserv MARKETS - Oct 15,2019
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Do fixed deposit rates keep changing? If so, how often?

Fixed deposits are one of the most common financial instruments of investment in India. Fixed deposits are also known as term deposits because money is deposited in a bank or a Non-Banking Financial Company (NBFC) for a predetermined period of time. The deposit provides an investor with a specified interest rate which can be availed either on the maturity of the deposit, or on regular intervals. Fixed deposits are safer than other investment instruments like mutual funds as they are not affected by market volatility, and the returns are fixed and known.

Types of fixed deposits

There are two types of fixed deposits on the basis of interest payouts, Cumulative fixed deposits and non-cumulative fixed deposits. While cumulative deposits provide interest rate payout on maturity, or on completion of the duration of the deposit, non-cumulative fixed deposit rates can be availed on a monthly, quarterly, half-yearly or annual basis. A cumulative deposit provides a higher interest rate as compared to non-cumulative deposits.

On the basis of the deposit schemes offered by financial institutions, fixed deposits can further be differentiated as bank fixed deposits and fixed deposits offered by NBFCs. Banks usually provide fixed deposit facilities to existing savings account holders. Though features like an added insurance cover is provided by banks, the fixed deposit rate is generally lower than those provided by NBFCs. If you are looking for a higher rate of interest, then you can opt for a deposit offered by NBFCs. You must, however, ensure that that the company has adequate creditworthiness. On Finserv MARKETS, you can select the best fixed deposit from Bajaj Finance, which has good ratings from leading analytical companies like CRISIL and ICRA. Bajaj Finance Fixed Deposits have the highest stability rating of FAAA/Stable by CRISIL and MAAA/Stable by ICRA.

Why and how often does the fixed deposit rate change?

There are certain factors that affect the rate of interest on fixed deposits offered by banks. Interest rates are directly linked with India’s Gross Domestic Product (GDP). Generally, interest rates increase if the GDP increases and decreases if the GDP shrinks. On the basis of growth of the country’s economy and existing market variables like inflation or recession, the Reserve Bank of India (RBI) revises its monetary policy. If there are inflationary conditions, then RBI hikes repo rates, allowing banks to provide increased interest rates to depositors. This helps to curb rising costs, as a higher interest rate prompts more savings. Conversely, if there are recessionary conditions, then the RBI decreases the repo rates, with a corresponding decrease in the interest rates being provided by banks. When the rate of interest is lowered, it prompts any individual to borrow and spend more. Other factors that impact the rate of interests are the existing liquidity scenario along with the demand and supply situation. Because of the low GDP growth rate in the present quarter of the financial year, which resulted in the revision of repo rate by the RBI, banks have cut down their interest rate on fixed deposits.

You must, however, remember that the best fixed deposits offered by NBFCs are not affected by the changes in monetary policy by the RBI. As NBFCs are not regulated by the laws governing private and public sector banks, they have not been affected by the recent fall in fixed deposit rates. On Finserv MARKETS, you can invest as a new customer in the Bajaj Finance Fixed Deposit, and avail an interest rate of 8.60% for cumulative scheme tenors ranging from 36 to 60 months. While existing customers enjoy an interest rate of 0.25% over and above the existing rates, senior citizens get 0.35%

The rate of interest for fixed deposits will vary for NBFCs only if the financial company announces a change in its interest rate. But on Finserv MARKETS, your investment in an existing fixed deposit will not be affected even if a new fixed deposit rate is announced. This is because your money remains locked-in for the tenure of the deposit as per the terms agreed upon at the time of opening the deposit. New interest rates, if announced, will be applicable only for new deposits.

Before zeroing in a fixed deposit of your choice, you must consider the best fixed deposits on Finserv MARKETS. Together with attractive and assured rates of interest, you can choose the frequency at which you get interest payouts. You can also access all the account details online.Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522