A good time to have bank fixed deposits

Bank | admin | September 22, 2011 at 5:55 am

Amrit Kumar couldn't have asked for a better time to retire. Averse to taking risks, he parked his savings in bank FDs. Six months ago he was earning 8% a year on his deposits . But after the public sector bank where he has his FDs repeatedly revised interest rates, he is earning 10%.

Had he opted for one of the older private players such as Laxmi Vilas Bank or Karur Vysya Bank, the 61-year-old could have earned more. Those like Kumar who have Rs 25 – 30 lakh in FDs, difference of a percentage point, means a lot. His earnings on these deposits have jumped from Rs 2.4 lakh a year, six months ago, to around Rs 3 lakh (pre-tax ) now.

Those who believe in FDs have not had it so good, especially when there's volatility in other assets. Chances are they'd be in for a bigger bonanza, given that RBI is likely to increase interest rates further. Experts say as of now deposits offer better returns than PPF or post office term deposits.

While this gap is likely to stay, there may be limited gains for depositors since demand for credit has slowed. "Besides, RBI has put restrictions on banks investing liquid funds. So…, there is lower pressure," PNB chairman and MD KR Kamath says.

Source: Economic Times