At a time when some of the government owned banks are offering an interest rate of around that 5.4% mark as maximum, IndusInd Bank is offering an interest rate of 6% and that too on the short term deposit end.
Let’s take a quick look at the interest rate being offered by IndusInd Bank
|61 days to 90 days||3.40%||3.90%|
|270 days to 354 days||5.50%||6.00%|
|1 Year to below 1 Year 6 Months||6.00%||6.50%|
|1 Year 6 Months to below 1 Year 7 Months||6.00%||6.50%|
|1 Year 7 Months to below 2 Years||6.00%||6.50%|
|2 years to below 2 years 6 Months||6.00%||6.50%|
|Above 3 years upto 61 months||6.00%||6.50%|
Our take on fixed deposits
The deposits look good in terms of interest rates for a period of 1-2 years. Investing for the longer term may not be so prudent and we tell you later, why it could be the case. We believe that interest rates on fixed deposits could remain the same or trend marginally higher in the next few quarters or so. It is likely that inflation risks to the economy remain and at some stage repo rates or interest rates at which the RBI lends to banks could be hiked. If that happens banks would be forced to align their interest rates accordingly. Also, as economic momentum gathers steam, credit offtake could be higher leading to a slight increase in interest rates. It may take a few quarters more, but, we believe that interest rates are unlikely to fall lower. We therefore suggest that do not go for Fds with long term tenure like 5-years. If you go for long term and if interest rates rise, you are trapped, because to break the deposit and open a new deposit would mean you would have to incur breaking charges of 1%.
Are fixed deposits secure?
We have not heard of any private sector bank or government owned bank default. Yes, cooperative banks have had their struggles and there were cases of defaults. Having said that private sector bank Yes Bank too had its share of problems when a moratorium was placed on withdrawals, but, eventually deposit holders received their money. Also, a sum of Rs 5 lakhs on deposits is insured with the Deposit Insurance and Credit Guarantee Corporation. All in all, we feel that for the short term period of 1 to 2 years, the IndusInd Bank deposits look interesting and one may consider investing in the same.