How repo rate impacts FD rates?

Know all the details about how repo rate can have an impact on the FD rates.
2 mins
14 Oct 2022

What is repo rate?
The repo rate regulates the interest rate at which the Reserve Bank of India (RBI) lends money to the banks, which eventually lend money to the end user. It is the interest rate at which banks borrow money from the central government body (RBI). The current repo rate in 2022 stands at 5.90% as per the 30th September 2022 update, when the Reserve Bank of India (RBI) raised the repo rate by 50 basis points. The hike in the repo rate was done to manoeuvre the increasing inflation and discourage banks from borrowing from the RBI. This is essentially done to control inflation and regulate liquidity in the system.

How repo rate works?
The Reserve Bank of India (RBI) regulates inflation in the country by managing the repo rate. Inflation is driven by the supply and demand chain in the economy. Higher inflation means a higher demand compared to the supply, leading to an increase in prices. To curb that demand the RBI then increases the repo rate making it more expensive for banks to borrow from the RBI.

Effect of repo rate on FD rates
Fixed Deposit investors may benefit from higher interest rates. The change in repo rates percolates down to the banks that change the loan and FD interest rates accordingly, affecting the buyers and lenders of the country. Investors who are planning to park their windfall income and surplus money in financial tools now would be the right time to do so. With the hike in the repo rate, banks and Non-Banking Financial Companies (NBFC) that offer fixed deposit investment option are likely to hike their interest rates as well. Investors can lock in their funds with shorter tenures as they can take advantage of the higher interest rates speculated in the upcoming months.

During the pandemic, the aim was to stimulate growth and aid the then-current economic scenario hence a lower repo rate was decided. The low repo rate allowed for an easy flow of liquidity in the economy. However, it forces the investors who prefer such fixed-income instruments to make a smart decision because lower repo rates signify lower interest rates. However, with the steep hike in repo rate, the interest rates on fixed income instruments are likely to rise. Hence, choosing the right fixed-income instrument becomes crucial. Financial avenues like fixed deposits might offer even higher returns.

Latest interest rates
Based on the recent repo rate the revised Bajaj Finance Fixed Deposit interest rates for customers below 60 years of age w.e.f November 22, 2022 are:

*Special interest rates are offered on tenure of 15, 18, 22, 30, 33 and 44 months.

 

Cumulative (interest +principal amount paid at maturity)

Non-cumulative (interest paid at a defined frequency, principal paid at maturity)

Tenure in months

At Maturity

(p.a.)

Monthly

(p.a.)

Quarterly

(p.a.)

Half Yearly

(p.a.)

Annual

( p.a.)

12 - 14

6.80%

6.60%

6.63%

6.69%

6.80%

15*

6.95%

6.74%

6.78%

6.83%

6.95%

16-17

6.80%

6.60%

6.63%

6.69%

6.80%

18*

7.00%

6.79%

6.82%

6.88%

7.00%

19-21

6.80%

6.60%

6.63%

6.69%

6.80%

22*

7.10%

6.88%

6.92%

6.98%

7.10%

23

6.80%

6.60%

6.63%

6.69%

6.80%

24-29

7.25%

7.02%

7.06%

7.12%

7.25%

30*

7.30%

7.07%

7.11%

7.17%

7.30%

31-32

7.25%

7.02%

7.06%

7.12%

7.25%

33*

7.30%

7.07%

7.11%

7.17%

7.30%

44 - 35

7.25%

7.02%

7.06%

7.12%

7.25%

36 - 38

7.50%

7.25%

7.30%

7.36%

7.50%

39*

7.60%

7.35%

7.39%

7.46%

7.60%

40-43

7.50%

7.25%

7.30%

7.36%

7.50%

44*

7.70%

7.44%

7.49%

7.56%

7.70%

45-60

7.50%

7.25%

7.30%

7.36%

7.50%


Senior citizens are offered additional returns up to 0.25% p.a. interest rates on all tenures.

Calculate returns on your FD through FD calculator