After four years, interest rates have begun to rise again. Only a few days ago, the Reserve Bank raised interest rates. As a result, bank and deposit rates will rise. Banks have begun to raise loan rates. Deposit rates have also increased somewhat. If your income is based on Fixed Deposits (FDs), Adil Shetty, CEO of BankBazaar, has some advice for you in the coming weeks.
Know about the deposit rates:
Banks provide the best rates on deposits with a term of more than three years. Deposits with shorter terms have lower rates than these. Canara Bank, for example, offers a 5.30 % one-year FD rate and a 5.75 % five-year FD rate. For the time being, clients can make short-term deposits. Make a minor long-term deposit when rates rise dramatically as we did.
Carry out Laddering:
Make a ladder of interest rates. Make deposits with varying durations and interest rates. This allows you to earn more interest while keeping your money out of a fixed-rate deposit. Your deposits will mature in a short amount of time, and you will be able to reinvest them for greater rates.
The interest rate differential between private and public banks:
Every bank accepts deposits at its own interest rate. Private banks may sometimes offer you a better rate of return. Government banks will provide somewhat lower rates when compared to them. For example, the ICICI Bank 5-yearyear FD rate is 5.60 %, whereas the State Bank of India rate is 5.40 %.
When compared to government and private deposits, the post office rates are significantly higher than both. You will earn 6.7% on their 5-year fixed-rate deposit. All of these rates, however, are about to rise.
Understand the distinction between large and small banks:
Small banks have the highest rates. Large banks, particularly public sector banks, will have lower interest rates. Suryoday Small Finance Bank, for example, offers a 7% return on three-year fixed deposits. There are also several cooperative banks that will offer you even better rates. The lesser the reward, the lower the risk. The greater the risk, the greater the reward.
Every bank has certain risks, which you as a consumer must be aware of. Some banks offer greater rates, but in recent years, the RBI has intervened, causing consumer funds to get frozen.
Besides interbank and post office transactions in banks and corporations, you can also invest in corporate FDs. Examine the company's credit rating. If it is AAA, it is regarded as safe. Less than AAA is a danger, and your money may become stranded. This alternative might provide you with 100 to 200 basis points (1-2 percent) better returns. This can significantly boost your earnings.