RBI MPC Meeting Repo Rate: From cities to small towns, people always want to invest their savings in a place where the money remains safe and also grows a little. In such a situation, when the Reserve Bank of India takes any major decision, its impact directly falls on the pockets of common people. On December 5, the Reserve Bank has announced to reduce interest rates. In the decision of the RBI MPC meeting, the repo rate has been reduced by 0.25 percent. That means the repo rate has come down from 5.50 percent to 5.25 percent.
This announcement has caught the attention of all those people who depend on the interest they get on their deposits. Especially the elderly, who need stable income every month, now the question in their mind is what will be the impact of this announcement on the interest rates of fixed deposits.
How much will be the impact on FD interest?
This cut made by Reserve Bank Governor Sanjay Malhotra is the fourth cut since February. This decision will not reduce the interest on your fixed deposits immediately, but in the coming days, banks may reduce the interest on short and medium term schemes. Many big banks have already reduced rates by 50 to 100 basis points since February.
According to banking experts, the purpose of reducing the repo rate is to boost the economy, but at the same time savers may need to change their investment structure a bit. In such times, the safest approach is not to tie your savings to a single period. By having several deposit schemes with different tenures, you will keep getting money intermittently and the risk of losing interest will also be reduced. Senior citizens, who get 25 to 50 basis points more interest than usual, are being advised to keep the long-term interest rate at the current level. Due to this, the impact of falling rates in future will be less on them.
Expert gave this opinion
According to Shashank Gupta, Director of RPS Group, RBI has again reduced the repo rate, which means that those who have FD for a long time will no longer get the same interest as before, the returns will reduce. But instead of panicking, think smartly. In such a situation, the best way is FD laddering – that is, divide your money in FDs of different tenures, so that the entire amount does not get stuck in low interest at once and whenever the interest increases, you can take some new benefits by holding some FD. Elderly people should make a mix of bank FD as well as good rated company FD and small savings schemes, this will provide security and also get a little more interest. There is good news for home loan takers – EMI per month on a 20-year home loan of Rs 35 lakh will be reduced by around Rs 1,850. This means that borrowers will be out of pocket and FD holders will have to think a little.
Borrowing cheaper for big companies
Investors associated with the bond market are watching the situation very carefully at this time, because the recent inflation figures and the banks not reducing the interest rates rapidly, both make the environment a bit different. At a time when the Reserve Bank of India cut the rate by 25 basis points, many experts are considering it as a timely decision. Expectations regarding inflation in the coming months seem lower than before, so the possibility has opened that there may be another cut before the end of the financial year. Its basic objective is to make borrowing cheaper for governments and big companies.
The announcement of open market purchases of Rs 1 lakh crore to increase liquidity is expected to improve the liquidity situation in the market and stabilize the yield curve. In such an environment, it is important for investors to take their steps wisely. Vishal Goelka, co-founder, IndiaBonds.com, said, “Investors should secure the currently high rates offered by companies for a period of 2 to 3 years and also combine investments in long-term government securities, where there is good potential for future returns.” This strategy means that on one hand you will be assured of higher returns from companies immediately, and on the other hand, long tenure government bonds can provide an opportunity for capital gains from a possible further decline in interest rates.
