As per data released by the RBI, approximately 57.7% of the total deposits in India is maintained as fixed deposits. It is one of the most popular investment schemes in India, owing to high FD interest rates with minimum associated risk.
Will fixed deposit interest rates increase or decrease?
In recent years, the global economy is heading towards a slowdown. As the entire world is bracing for a major recession most likely to hit 2020, most economies including India is trying to boost aggregate demand by making borrowing cheaper. To this end, severe cuts in repo rates have been witnessed in recent times.
Such fall in repo rates stimulates overall borrowing in the market, as it effectively reduces interest rates offered on all products by financial institutions.
A reduction in interest rates on all savings schemes discourages individuals to save substantially, while a fall in interest rates payable on loans encourages businesses to avail larger amounts of credits to increase their production. A higher level of production combined with lower savings rates successfully picks up the reduced demand in the country due to recession, allowing the economic condition to stabilise.
Thus, the central government of India and RBI are planning to reduce interest rates on various savings schemes such as fixed deposits in the year 2020 to boost development of the country.