With the latest news on fixed deposits stating that the rates of interest are expected to fall to an all time low, investors all across the country are rushing to the fixed deposits of banks to invest their funds before the rates of interest, as predicted, fall down. Their main objective is quite in sync with the notion – ‘Make hay while the sun shines’. As the central bank of the country, the Reserve Bank of India, had recently announced that with a dip in inflation rates, it is expected to reduce the existing rates of interest offered on fixed deposits, shockwaves were sent across investors in the country. People, who viewed fixed deposits as time-tested tools that stood through the highs and lows of the economy are now forced to put their faith to the test. And why shouldn’t it, after all having investments eliminates the possibility for one to opt for debt like car loans, personal loans etc. In the light of this scenario, it has become all the more difficult for many people to come to terms with this decline in interest rate as many people depend on this interest as their income, especially the retired class of people in the country. But as people are rushing to bank counters in order to take advantage of the profitability of these fixed deposits before they lose their former glory, it has become quite difficult for banks to respond to such an immediate demand.
Banks are finding it extremely taxing to concentrate on their routine work with this sudden rush and frenzy as a result of the demand for their fixed deposits. With the banks coming close to their quarter this year, it has further complicated matters during their closing time. Never has such a demand for fixed deposits been recorded before in the country. Large sums of money are being deposited by investors in varied sums and tenures from different parts of the country, with the amount of money seeing a sudden surge within the past few days. Banks had no idea that the news on slash in interest rates would provoke such frenzy amongst investors. But with interest rates already coming down, people are seeking to benefit from these fixed deposits before they further fall down.
Financial analysts consider this to be a smart move by investors and people need to rush before interest rates fall further down. Even if the current interest rates on fixed deposits are to be considered, people are expected to make a good margin of profit even if you take the current rates of interest in consideration. Before the rate of inflation further spirals down, it is advisable to bank your funds in high return deposits. But be prepared for any further rate cuts by banks that are expected in the near future. While you make money through these rates of interest, bear in mind that these rates of interest will surely spiral downward in the near future. Another reason why the consistently high rates of interest of banks are coming down can be attributed to the shuttle of funds from savings and current accounts to fixed deposits by customers. As a result, banks lower their deposits under their Current and Saving Account or CASA. This means that with a low ratio of CASA deposits, banks get really concerned due to the fact that these deposits serve to be the cheapest sources of money for banks. No rate of interest in applied on current account deposits while savings bank deposits enjoy a comfortable rate of interest. To make up for this drop in rates of interest, banks may reduce their rates of interest on fixed deposits further down.