All eyes were on the Reserve Bank of India, as its monetary policy committee was discussing repo rate hikes amid global inflation and recession. Although India's inflation did drop below the RBI threshold of 6 per cent in December, the central bank was expected to go for another rate hike. Although a 25 basis points hike was less intense than 50 and 35 points previously, it did push the interest rate to 6.5 per cent.
This makes borrowing from banks more expensive, and EMIs will be higher, but at the same time those with fixed deposits can rejoice. Currently leading banks are offering a 6 per cent to 7 per cent interest on fixed deposits, based on different tenures.
The repo rate hike will enable the banks to increase the interest which will be accumulated in savings deposited by citizens. One of the leading private banks, ICICI has already hiked interest on FDs by 1.5 per cent, taking it to a maximum level of 7.15 per cent. It will be applicable on FDs worth more than Rs 2 crore and less than Rs 5 crore.
RBI's move also makes this the best time to invest in an FD, and a long-term FD with a minimum tenure of five years, can also help save taxes worth Rs 1.5 lakh. The hike also comes right after the Union Budget 2023, which has introduced schemes such as a women's savings account, which offers a 7.5 per cent rate of interest. With higher interest on fixed deposits, common people could hope for similar returns on their savings.
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