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Fixed deposit interest rates to go up again? RBI hits at another hike

In its monthly bulletin released on Tuesday, the Reserve Bank of India (RBI) said that the competition between Indian to expand their deposit base may force them to increase the (FD) rates. Indian have continually raised deposit since the started hiking the repo rate last year. Since May 2022, it has increased the repo rate by 250 basis points (bps).

In the bulletin, the said that the Indian economy is unlikely to face any major repercussions from the ongoing global financial turmoil.

“Unlike the global economy, India would not slow down – it would maintain the pace of expansion achieved in 2022-23,” it said.

The bank said India had emerged from the pandemic years stronger than initially thought with the agriculture sector seeing a seasonal uptick, the industry emerging out of contraction and services maintaining momentum.

However, it raised concerns over sustained price rises saying consumer price inflation remains high and core inflation continues to defy the distinct softening of input costs.

Annual inflation in February eased only marginally to 6.44 per cent from 6.52 per cent in January, staying above the central bank’s mandated target band of 2-6 per cent.

On the supply side too, the bulletin said India’s agriculture sector is into a seasonal uptick, whereas the industry is emerging out of earlier contraction and services have maintained momentum as well.

Even as global growth is set to slow down or even enter a recession in 2023 as global financial markets wager, India has emerged from the pandemic years stronger than initially thought, the report said. The central bank’s nowcast of real GDP growth for the fourth quarter of the current year stands at 5.3 per cent.

India’s economy grew by 4.4 per cent in the third quarter and is expected to expand by 7 per cent for the fiscal year ending March after recording a growth of 9.1 per cent in 2021-22.

Is another rate hike coming?

Experts believe that the RBI is expected to go for another 25 bps hike in April. This will take the 6.5 per cent repo rate to 6.75 per cent.

(With agency inputs)

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