RBI monetary policy: A rate hike scenario is likely to make FD rates attractive
The Reserve Bank of India (RBI) is set to announce the bi-monthly monetary policy later this week. The central bank is expected to hike the repo rate yet again to tame multi-year high inflation. Notably, any change in RBI’s repo rate will have an impact on the lending and deposit rates of the bank. In the last two policies when RBI hiked the repo rate by 90 basis points, both benchmark lending rates and deposit rates have been increased by the banks as well. In a rate hike scenario, fixed deposits become attractive as banks usually hike interest rates on this investment mechanism. FDs are one of the safest and most traditional forms of investment in India, as it offers guaranteed return and is risk-free.
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