RBI MPC announcement April 5: High interest rate FDs may continue | Here’s how

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New Delhi: The Reserve Bank of India’s monetary policy committee (MPC) is likely to keep the repo rate, the rate at which RBI lends to banks, unchanged in its announcement on April 5, 2024 — a decision that is likely to keep the higher interest rate FDs available for some more time.

The RBI MOC is unlikely to tinker with the repo rate since the Indian economy is going through a buoyant phase, having registered a strong performance of 8.4 per cent in the third quarter of FY24.

Inflation is also on a downward trajectory cooling to 5.09 per cent in February from 5.1 per cent in January. Moreover, banks are witnessing a significant credit uptake which needs to be backed by deposits. Credit growth has outpaced deposit growth as of March 8, 2024, according to a Bank of Baroda report.

This indicates that as banks continue to lend, high-interest-rate deposits will remain in vogue to back the loans extended. The RBI is also unlikely to unwind the repo rate before the US Federal Reserve, the Bank of England and the European Central Bank.

What to do if RBI keeps repo rate unchanged?

If the RBI MPC decides to keep the repo rate unchanged, investors can consider parking their money in high-interest FDs for the long term. They may also keep an eye out for certain FD tenures whose interest rate may be hiked further, to maximise their returns, the ET reported, citing Nirav Karkera, head of research at Fisdom. BankBazaar CEO Adhil Shetty suggests ‘laddering’, which means investing in an instrument for the long term.

When will RBI slash repo rate?

The RBI is likely to slash the repo rate in the second half of FY25 when headline inflation is expected to cool down to the RBI’s 4 per cent target, according to an analysis by CareEdge. Rate cuts are likely to be in the 25-50 basis points range, according to a report by the Bank of Baroda.

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