🗞️ Press Update: RBI Repo Rate Unchanged
Understanding the impact of Repo Rates on your investments!
Often times we forget that policies impact our daily lives. Big decisions trickle down to us and impact our everyday.
Recently, RBI’s monetary policy committee maintained the status quo in October policy, and the Repo Rate stayed unchanged at 6.50% in line with market expectations.
It was a unanimous decision. In fact, this marks the fourth consecutive policy meeting wherein the Repo Rate has been unchanged.
Now you must be wondering, what does this mean for your investments?
How does the Repo Rate impact FD interest rates?
The movement of the Repo Rate directly impacts returns from fixed-income instruments.
The Repo Rate is directly proportional to FD interest rates. This means when Repo Rates rise, FD interest rates rise. Conversely, when repo rates fall, FD interest rates also fall.
The Repo Rate is a key policy rate a banking regulator charges to lend to commercial banks. When the Repo Rates fall, the cost of borrowing capital for commercial banks declines.
This means that banks have to rely lesser on fixed deposits for meeting any capital requirements. Thus, they reduce FD interest rates, by the same logic.
On the other hand, when Repo Rates are hiked, the cost of borrowing capital for banks increases. Thus, they raise the interest rate on their loans and try raising their income on priority.
So now, they can offer to give higher interest rates to depositors. Plus, they can meet some capital requirements via FDs by offering high interest rates since overall the market has high-interest rates.
In summary: An unchanged Repo Rate of 6.50% is excellent for FD interest rates.
Is now the best time to invest in FDs, or should I wait longer?
6.50% is the highest Repo Rate in the last 7 years and has remained unchanged all year. Macroeconomic indicators suggest that concurrently FD interest rates are the best of this decade!
We’re seeing a spectacular moment in time when interest rates are as high as 8.50%. With quarterly compounding, you get an assured 8.77% annual return.
Any retail investor understands that an 8.77% annual return at minimal risk is basically a no-brainer. It’s the best time to lock in your investment.
The highest FD rates in a decade deserve a front-row seat in your portfolio.
It was important for us to let you know about a policy change that directly impacts your investment! Rest assured, we’ll keep you updated in the future too.
Best,
Team Stable Money