Investors are not sure when it comes to pushing their hard-earned money into equities because of uncertain market conditions. So, they are shifting their focus towards fixed deposits. FDs offer less interest rate compared to other money instruments, however, still many are pretty happy with fixed deposits because of the safety perk. There are certain factors that have a direct impact on interest rates, and it is important to know about those factors.
Here, let us see the factors that affect interest rates.
Duration plays an important role in deciding the interest rate on your fixed deposit. Banks offer low-interest rates for short duration FDs and high-interest rates for longer duration FDs. The higher the duration of your investment, the higher is the interest rate.
Anyone who attains an age of 60 is considered as a senior citizen, and they are entitled to avail higher interest rates offered by banks, NBFCs or any other financial entities. For instance: SBI is offering an additional interest of 0.5 per cent for senior citizens.
Financial companies offer an additional interest rate for investors when they renew their FDs. For instance: Bajaj Finserv offers an additional interest of 0.10 per cent on renewals. Renewing fixed deposit is the best option to earn a bit more on your invested sum.
GDP's performance or economic slowdown, recession, RBI monetary policies like a change in the CRR (cash reserve ratio) and repo rate, inflation, liquidity, etc., are the other key factors that have an impact on the interest offered by the financial entities.
An individual who can’t stomach the risk and wants to play a safe game can invest in this traditional deposit scheme that offers guaranteed results.
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