How Interest Rates Can Influence Financial Decisions-FinancePlusInsurance

How Interest Rates Can Influence Financial Decisions?

Fixed deposits are one of the safest and most widely popular investment tools. The banks provide the same at attractive interest rates. In this secure investment option, the investor deposits a certain amount of money as a lump sum with the bank for a specific period of time. The investor gets to earn a predetermined interest rate.

As per the compounded interest calculation, the investor receives the amount as well as the interest earned on the FD after the FD matures. Different banks in India offer FD at various interest rates. While some banks may offer a higher FD rate than others, some offer less than the average. Senior citizens get a better interest rate compared to others.

NBFCs also offer fixed deposits along with several other small finance companies. Bajaj Finance is a leading Non-Banking Financial Company that offers one of the highest FD interest rates to its customers. Bajaj Finance provides more than a 7% interest rate to the clients, which is much higher than the average market rate. This rate is offered to the customers in the term between 1 year to 5 years. The minimum investment amount needs to be just ₹25,000.

FD Rate Impacting Financial Decision

Since the FD rate directly impacts the investor’s earnings, it is one of the prime determinants when making a financial decision. The higher the FD rate, the more the earnings at the maturity period of the FD. You can use interest rate calculator to compare it. This is the reason the investors invest in a bank or NBFC that offers the best return on investment compared to the others.

Here are the FD rates offered by different banks*:

BankInterest RateSenior Citizen Interest RateTenure
SBI2.90% – 5.50%3.40%-6.30%7 days-10 years
HDFC Bank2.50% – 5.60%3.00% – 6.35%33-99 months
ICICI Bank2.50% – 5.50%3% – 6.30%7 days -10 years
AXIS Bank2.50% – 5.75%2.50% – 6.50%7 days-10 years
Bank Of India2.85% – 5.05%3.35% – 5.55%7 days – 10 years
Union Bank3.00% – 5.50%3.50% – 6.10%7 days – 10 years
Kotak Bank2.50% – 5.61%3.00% – 6.14%7 days – 10 years
BOB Bank2.80% – 5.10%3.30% – 6.35%7 days – 10 years
IDBI Bank2.70% – 5.50%3.20% – 6.00%7 days – 10 years
IDFC Bank2.50% – 6.00%3.00% – 6.50%7 days – 10 years
HSBC Bank2.25% – 4.00%2.75% – 4.50%7 days-5 years
Central Bank of India2.75% – 5.15%2.75% – 5.15%7 days-10 years
RBL Bank3.25% – 6.30%3.75% – 6.80%7 days-10 years

While the rates offered by the NBFCs are mentioned in the below table:

NBFCs Offering FDInterest RateSenior Citizen Interest RateTenure
Bajaj Finance5.70% – 7.20%5.94% – 7.45%1 – 5 years
LIC Housing Finance5.15% – 6.00%5.40% – 6.25%1 year – 5 years
PNB Housing Finance2.90% -5.253.40% – 5.75%1 year – 10 years
ICICI Home Finance5.25% – 6.70%5.50% – 6.95%1 year – 10 years

*Interest rates mentioned in the above table can vary from one lending partner to the other and are subject to change

So, as you can see NBFCs such as Bajaj Finance offer the highest FD interest rates, and hence, most investors prefer investing with Bajaj Finance. You can also look at best investment plan for your research purpose.

The country’s central bank, or RBI, has the authority to control the policy rates. They can control the monetary policy, which impacts the interest rates of different financial products such as Fixed Deposits. As per the regulations of the RBI on the banks and NBFCs, the interest rate offered by the financial institutions are controlled.

The decrease in the interest rates on fixed deposits happens when there is a cut in the RBI repo rate. Fixed deposit interest rates can also be decreased at the time of recession, and the central bank increases the supply of money in the economy.

Wrapping Up

Fixed Deposits have been a secure form of investment for years. The risk-averse investors prefer taking several FDs with the highest FD interest rates. Since it offers a higher interest rate than a savings bank account and is considered a more secure option compared to other investment options like the stock market, bonds, gold, and real estate, the investments in FD never go down.