The Reserve Bank of India (RBI) regulates inflation in the country by managing the repo rate. Inflation is driven by the supply and demand chain in the economy. Higher inflation means a higher demand compared to the supply, leading to an increase in prices. To curb that demand the RBI then increases the repo rate making it more expensive for banks to borrow from the RBI.
How repo rate Impacts FD rates?
The correlation between fixed deposit interest rates and the repo rate is straightforward. When the repo rate increases, FD interest rates follow suit, and when the repo rate decreases, FD interest rates decline as well. This connection is clear-cut.
If you have surplus funds for investment, the current period presents a favorable opportunity. As the repo rate rises, both banks and Non-Banking Financial Companies (NBFCs) typically enhance the interest rates offered on fixed deposits. Therefore, considering shorter-term fixed deposits now could be a wise move to capitalize on the anticipated rise in interest rates in the upcoming months.
During the pandemic, the aim was to stimulate growth and aid the then-current economic scenario hence a lower repo rate was decided. The low repo rate allowed for an easy flow of liquidity in the economy. However, it forces the investors who prefer such fixed-income instruments to make a smart decision because lower repo rates signify lower interest rates. However, with the steep hike in repo rate, the interest rates on fixed income instruments are likely to rise. Hence, choosing the right fixed-income instrument becomes crucial. Financial avenues like fixed deposits might offer even higher returns.
The emergence of Repo-Linked Fixed Deposits
Banks are now adopting the practice of offering a repo-linked interest rate, allowing investors to take advantage of favorable changes in Repo Rates. Ordinarily, a rise in the Repo Rate might result in reduced real returns. However, with a Repo-linked interest rate, the increase in the repo rate is incorporated into an adjusted higher interest rate.
Latest interest rates
Based on the recent repo rate, the revised Bajaj Finance Fixed Deposit interest rates for customers below 60 years of age w.e.f 14 November, 2024 are:
*Special interest rates are offered on tenure of 18, 22, 33, 42 and 44 months.
| Customers below the age of 60 – Bajaj Finance Digital FD |
| Tenure in months |
At maturity
(p.a.) |
Monthly
(p.a.) |
Quarterly
(p.a.) |
Half yearly
(p.a.) |
Annual
( p.a.) |
| 42* |
8.60% |
8.28% |
8.34% |
8.42% |
8.60% |
| Customers below the age of 60 – Special Period |
| Tenure in months |
At maturity
(p.a.) |
Monthly
(p.a.) |
Quarterly
(p.a.) |
Half yearly
(p.a.) |
Annual
( p.a.) |
| 18* |
7.80% |
7.53% |
7.58% |
7.65% |
7.80% |
| 22* |
7.90% |
7.63% |
7.68% |
7.75% |
7.90% |
| 33* |
8.10% |
7.81% |
7.87% |
7.94% |
8.10% |
| 44* |
8.25% |
7.95% |
8.01% |
8.09% |
8.25% |
| Customers below the age of 60 – Regular Period |
| Tenure in months |
At maturity
(p.a.) |
Monthly
(p.a.) |
Quarterly
(p.a.) |
Half yearly
(p.a.) |
Annual
( p.a.) |
| 12 - 14 |
7.40% |
7.16% |
7.20% |
7.27% |
7.40% |
| 15 - 23 |
7.50% |
7.25% |
7.30% |
7.36% |
7.50% |
| 24 - 35 |
7.80% |
7.53% |
7.58% |
7.65% |
7.80% |
| 36 - 60 |
8.10% |
7.81% |
7.87% |
7.94% |
8.10% |
Senior citizens are offered additional returns up to 0.40% p.a. interest rates on all tenures.
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