Policy actions of last
fortnight were eagerly awaited because that would set the tone for the interest
rates during the next financial year.
With effect from 10th
March, RBI reduced Cash Reserve Ratio (CRR) by 75 basis points (one percentage
is 100 basis points) from 5.5% to 4.75%.
CRR is the percentage of deposit that commercial banks must keep with RBI. The CRR cut was expected as the entire
banking system was experiencing liquidity tightness and it was expected to be
worsen on account of advance tax payments before 15th March.
In subsequent week, RBI
maintained the interest rates during fourth mid quarter review on March
15.
A day later, finance
minister announced the budget for 2012-13 raising the indirect tax levy. The budget is expected to be inflationary on account of the same.
With fiscal deficit projected
to be 5.1% of GDP in 2012-13, government’s huge borrowing programme for the
next year and possibility of inflation to remain high, RBI has tough task ahead
to maintain adequate liquidity in the system and inflation low simultaneously.
Effect
of interest rates on fixed deposits
The above factors shall
ensure that interest rates on loans as well as fixed deposits stay elevated for
most part of the next year.
Currently, banks like Tamilnad
Mercantile Bank and IDBI are offering interest rate of 10% and 9.5% per annum respectively
on fixed deposits for tenure greater than 5 years. Short term rates for period less than 1 year are
also attractive.
Since the time Bachhat started tracking interest rates
on fixed deposits, the average interest rates of all banks for period less than
3 months has increased by 104 basis points and for period between 3 months to 6
months has increased by 82 basis points.
Even for period greater than 5 years, the increase is by 39 basis points.
|
Tenure
|
Average Interest Rates
(%)
|
Difference
(%)
|
|
|
8th May
2011
|
20th March
2012
|
||
|
< 3 months
|
5.59
|
6.62
|
1.04
|
|
3 to < 6 months
|
6.78
|
7.60
|
0.82
|
|
6 to < 12 months
|
8.16
|
8.60
|
0.44
|
|
1 to < 2 years
|
9.25
|
9.47
|
0.22
|
|
2 to < 3 years
|
9.02
|
9.24
|
0.21
|
|
3 to < 5 years
|
8.80
|
9.16
|
0.36
|
|
5 years & above
|
8.67
|
9.06
|
0.39
|
This is a good time for someone who wants to lock-in to high interest rates on fixed deposits.
One can view the latest interest rates on fixed
deposit offered by various banks here.
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