Interest rates on bank deposits are likely to fall given that the Reserve Bank of India has just cut interest rates or repo rates at which it lends money to other banks.

Here is a quick comparison of interest rates on bank fixed deposits in India:

What Is The Tenure Of Fixed Deposit You Should Invest?

Repo rate is the interest rate at which the Reserve Bank of India lends money to banks in India. Any cut in these rates leads to banks cutting their lending rates and also deposit rates.

It is widely expected that banks will cut their deposit rates in the next few days, which is why it makes sense to invest in them quickly.

Also, remember to put money in bank fixed deposits for a slightly higher duration given the fact that interest rates in the economy are slated to fall.

Let's give you the same with example. Let's say you invested in the Punjab National Bank Fixed Deposit whose interest rates are 8.75% for one year today.

After one year, when you wish to withdraw the amount the chances are that you would get a lesser interest rates as the same are falling.

If after one year when you wish to renew and if the interest rate is only 8%, you have lost 0.5%.

Now, let's assume that you invest in the Punjab National Bank Fixed Deposit for three years at 8.75%.

You do not have to bother about renewing it next year at 8%, since you have locked money in the deposit for a slightly longer term of three years.

Therefore, you have hedged yourself against declining interest rates.

Conclusion

So, when interest rates are falling the wise thing to do would be to invest for long term and if you expect a rise in interest rates, you should invest in fixed deposit for the short term.

Remember, it's never easy to pick the interest rate trend, but, if you ask any analyst at the moment, the clear trend is down.

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