Fixed Deposit Rates: Worried About Falling Interest Rates?

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Fixed Deposit Rates- Worried About Falling Interest Rates

If you are wondering what a fixed deposit is and why falling interest rates are a dampener for investors, read on to know more.

After the two back to back cuts in Repo rate by RBI, fixed deposit rates are falling and resulting in investors losing interest in FDs. There will be a lasting impact on the global economy. But interest rates will not stay low forever.

Impact of Falling Interest Rates

Most safe investments such as Fixed Deposits (FDs) and bonds are getting affected adversely because of the drop in interest rates. Across the world, central banks have lowered down the interest rates to help in stimulating economic activities. Consequently, people dependent on the interest from their investments returns are seeing a drop in their returns.

How to Get Benefitted in the Current Scenario?

Returns on investments lower down due to falling interest rates, but there are a few options like FDs with NBFCs to stay protected. FD investment with NBFC is a good option to get higher interest.

How You Can Lock in a High Interest Rate

Leading non-banking financial institution (NBFC) like Bajaj Finance is offering one of the safest and best online investments that grow over time – Fixed Deposits. You can earn high interest on Bajaj Finance FD up to 7.35%. The minimum amount to invest is as low as Rs.25,000. It is one of the best online investments currently as it offers an additional interest rate benefit of 0.10% if you book an FD via online application.

Following are the details of interest rates offered on Bajaj Finance Fixed Deposit against different tenures. Senior citizens will be offered an additional 0.25% rate of interest.

Tenor in MonthsMinimum deposit amountAnnual rate of interest for FD up to Rs. 5 crores (w.e.f 04/07/2020)
12 – 23Rs. 25,0006.90% + 0.25% for Sr. Citizen
24 – 35Rs. 25,0007% + 0.25% for Sr. Citizen
36 – 60Rs. 25,0007.10% + 0.25% for Sr. Citizen

Alternatives to Falling Interest Rates

Bajaj Finance FDs will be best to lock in your money here because of the following factors:

1. Increase payout with laddering – Laddering refers to creating multiple FDs each with different maturity dates. By spreading investment across several FDs and at a fixed interval of time, investors can manage reinvestment risk because as one FD matures, the cash can be reinvested in the nearest FD on the ladder. It will reduce the risk of interest rate also because, even if interest rates decline during the holding period of one of the FDs, the smaller amount of reinvestment reduces the risk of investing a lot of cash at a low rate of interest.

2. Flexibility to choose tenor – You can choose a flexible tenor of 12 to 60 months with Bajaj Finance. You can achieve your short and medium-term goals with such flexible tenor options. The returns are highest for a tenor of 36 months or more because of the power of compounding interest.

3. High Interest Rates – Here is an example of high returns with Bajaj Finance. A senior citizen wants to invest Rs.10 lakh for 5 years in Bajaj Finance FDs. The applicable interest rate is 7.35% for Sr. citizens. The depositor will earn an interest of Rs.4,25,641 at the maturity by Aug 2025. The total maturity amount is quite attractive i.e. Rs. 14,25,641.

4. Credibility– Reputed credit rating organizations such as CRISIL and ICRA have accredited Bajaj Finance FD for its safety and stability with highest ratings of FAAA/Stable and MAAA/Stable respectively. With such high ratings, you are assured of guaranteed and timely repayment of the interest amount and principal amount.

Therefore, look for the right alternative to falling interest rates. With such easy and flexible investments you still have the opportunity to maximize your returns.

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