India's Largest Private Bank & 4th Largest Private Bank Hike Fixed Deposit Interest

HDFC Bank and Kotak Mahindra Bank have both hiked their interest rates recently. However, HDFC Bank has hiked its deposit interest rates only on bulk deposits of Rs 2 crores to Rs 5 crores. General public now get an interest rate ranging from 4.75% to 7.00% per annum. For elderly individuals the bulk fixed deposits range from 5.25% to 7.75%.

Kotak Mahindra Bank has hiked the interest rate on domestic term deposits maturing in 180 days has been increased by 50 basis points, or from 6 per cent to 6.50 per cent. Senior citizens will receive a 0.50% extra over the general deposit rates of up to seven per cent.

These 2 banks join a growing list of banks to have hiked interest rates on fixed deposits including the likes of ICICI Bank, Axis Bank, Punjab National Bank and State Bank of India.

Remember, the Reserve Bank of India itself has raised the repo rates from 4% to 6.50%, effecting a hike of as much as 250 basis points. This has led to most banks hiking their deposit rates. In fact, lending rates too have moved in tandem increasing steadily.

What should fixed deposit investors do now?

It's highly possible that interest rates by the Reserve Bank of India could be raised again by 25 basis points in its forthcoming meetings. Post that we believe that interest rates could have peaked and hence investors should look for longer term duration for fixed deposits. Towards the end of the year we see interest rates peaking and falling beginning from the next year onwards. It is therefore imperative for those who are investing in fixed deposits to lock money for 3-5 year deposits. So, just in case interest rates drop you are on a sound footing. A tenure of 3-5 years would be ideal for investors at the moment. Globally too interest rates have rallied thanks to fears of inflation.