FD interest rates: Should investors lock their savings in fixed deposits now?

In view of the banks in the recent past, investors are recommended to lock some of their savings in fixed deposits (FDs) at the . It is vital to mention that most private and state lenders have recently raised their interest rates, while a few have introduced special interest schemes. For instance, offers 7.15 percent per annum on 399 day fixed deposits under what is known as .

Likewise, Bank of India has introduced offering a higher rate of 7.5 percent for large deposits. The financial institutions, which have recently raised their term deposits include (SBI), Bank of Baroda, Kotak Mahindra, Axis, DCB Bank and . Lenders which have started offering over 7 percent on their one year deposits include ICICI Bank (7.25 per cent) and (7.15 percent).

At the same time, banks which offer over 7 percent on longer duration deposits include Bank of Baroda (7.25 percent for 2 3 years), (7.10 percent for 15 18 months) and Axis Bank (7.10 percent for 15 months onwards). There are two key advantages of locking your savings in the fixed deposits at the current interest rate.

One, the interest rates have risen substantially in the past few months as a result of the . Second, the interest rates may see a fall towards the end of this calendar year. So, before the interest rates start to decline again, it is advisable to lock the prevailing rates. One financial expert spoke to believes that those investors whose financial goal is 2 3 years away can now lock the required amount in a fixed deposit because there is little hope of further hike in interest rates.

“As there were constant small increases by the central bank in the interest rate, investors were postponing making FD in the hope of a high interest rate. But now for the past 2 3 quarters, there has been a pause in the hike of interest rates. Besides, there is no hope of an increase in the FD rate in the future.

There is a strong possibility that after the first 2 3 quarters of this new year, the interest rate will start coming down. That is why if your financial goal is 2 3 years you can now lock the required amount in a fixed deposit," says Preeti Zende, a Sebi registered financial advisor and founder of Another expert spoke to asserts that investors should consider fixed deposits as well as as viable investing options for the prevailing high interest rates.

“In light of the current interest rate cycle reaching its peak, it seems wise for investors to consider favouring long duration investments and securing the higher interest rates offered by FDs and other debt instruments. As global central banks contemplate potential interest rate cuts this year, investors may find strategic advantage in maintaining long term positions in FDs and debt instruments, capitalising on current higher interest rates before any anticipated adjustments," says Deepak Gagrani, founder of However, there is a word of caution for the ones who have the proclivity to go overboard.

“Just current interest rates on fixed deposits are lucrative, do not get tempted to lock a major chunk of your money in them. FDs are taxable and in the long run fail to generate inflation hedged returns. So, take a proper call as per the required asset allocation of your financial goals," Ms Zende signs off.

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