5 Factors that Influence Fixed Deposit Interest Rates

Fixed Deposit Interest Rates

Fixed deposits are one of the most preferred financial instruments that investors include in their folio to reap assured interest returns. Over the years, they have attracted a large number of investors, courtesy of their high rate of interest. FD interest rates vary across issuers based on a number of parameters that include your investment amount, tenor choice, and interest payout requirements. To ensure that you earn good returns, you can invest in fixed deposits that are rated high on stability and safety.

A fixed deposit interest rate is the percentage at which you earn returns on your fixed deposit investment. When you are looking to open a fixed deposit account, the most crucial step is to compare and select the one that offers the highest interest rate on FD.

You can earn some of the highest returns by investing in a Bajaj Finance Fixed Deposit and enjoy exciting benefits too. By investing in this FD, you can earn interest up to 8.75% on a cumulative FD for at least 36 months or up to 9.10% if you are a senior citizen with a cumulative FD for the same tenor. What’s more, you can gain up to 0.25% additional interest in the renewal of your FD or by choosing the special tenor scheme and use online account management to handle your investment with ease.

  • Factors that affect FD interest rates

Read on to take a closer look at the factors that are considered by banks, NBFCs and companies while setting rates.

  • RBI regulatory policies

RBI rates like repo rate, statutory liquidity ratio (SLR) and cash reserve ratio (CRR) influences various interest rates such as that of home loan and savings accounts. These factors also affect the rate of interest of a fixed deposit.

  • Supply and demand for credit

When the demand for credit is high in the market, FD interest rates also increase. This rate is increased to attract more customers and meet the demand of credit prevailing in the market. Similarly, if the demand for credit is low, the interest rate on FD will decrease. Thus, the demand and supply of credit play a vital role in deciding the fixed deposit interest rate.

  • Tenor and amount invested

The amount you wish to invest in a fixed deposit also affects the interest rate. When you deposit higher amounts, you attract a higher rate of interest and vice-versa. Apart from this, tenor for which you are investing highly affects your FD interest rate. This is because interest on these deposits varies significantly depending on the tenor chosen while starting the investment. Certain lenders offer high FD interest rates for special durations. Normally, the longer the tenor, the more interest you will earn.

  • Economic conditions

Economic conditions prevailing in the country play an important role in deciding the rate of interest for various financial instruments including fixed deposits. In the event of a recession, RBI releases funds in the market by reducing the cash reserve ratio which, in turn, reduces FD interest rates. Similarly, during inflation, the rate of interest for FDs decreases.

  • Type of fixed deposit

Fixed deposits are of two types: cumulative and non-cumulative. When you want to earn interest on a monthly, quarterly, half-yearly or annual basis, you can start investing in a non-cumulative FD; however, the total interest earnings in this option is low. When you wish to earn higher returns, consider investing in a cumulative FD that offer you the power of compounding your interest earnings.

To earn lucrative returns from a high FD interest rate, you can invest in short-term or long-term FD depending on your financial needs. Before investing, you can check the maturity amount using the FD calculator to land on the best deal. Get started now and apply online for the Bajaj Finance FD.

Also, Read This: Smart Investment Options Available in India?