Fixed Deposit Rate Hikes To Stop Soon: Is It Time To Reassess Your Investment Portfolio?

As fixed deposit rate hikes are anticipated to stop, investors should consider alternative options that offer the potential for higher returns.
Fixed Deposit Rate Hikes To Stop Soon: Is It Time To Reassess Your Investment Portfolio?

The Reserve Bank of India’s (RBI) decision to maintain the status quo on interest rates has led experts to believe that the era of fixed deposit (FD) rate hikes may be coming to an end. Factors such as the repo rate pause and surplus liquidity in the banking system are contributing to this prediction. For investors, it is important to assess the implications of this development on their investment portfolios.  

So is it the right time to reassess our investment portfolios?

Locking Into Favorable Rates:

According to Adhil Shetty, CEO of, the current advice is to lock into FD rates since they are not expected to rise significantly soon. Many banks are offering attractive rates, such as 7.50 per cent, on select tenors for senior citizens. Some banks even provide these rates for longer tenors, ranging from 5 to 10 years. This presents an opportunity to consider FDs as short-term instruments and long-term income generators in a high-rate scenario.

Exploring Alternative Options:

While FDs offer stability and guaranteed returns, it is also worth considering alternative investment options that may yield higher returns. Anant Ladha, founder of Invest Aaj For Kal, suggests breaking old, long-term FDs and reinvesting the proceeds to increase the yield. Additionally, smaller private banks often offer higher interest rates than larger ones. Investing up to Rs 5 lakh in these banks, you can benefit from the higher rates while still enjoying the protection provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC).

Another strategy to consider is the ladder strategy for FDs. This involves dividing the investment amount into three or four tranches with different terms and amounts. By allocating most of the investment to medium-term FDs, which currently offer the best rates, investors can maximize their returns while maintaining liquidity and flexibility.

Exploring Debt Mutual Funds:

With expectations that interest rates may recede in the coming months, debt mutual funds can be an attractive alternative to FDs. Long-duration funds, in particular, can potentially deliver higher returns than FDs. It is vital to conduct thorough research and choose funds that align with your risk tolerance and investment objectives.

Considering Multi-Asset Mutual Funds:

For investors with a higher risk appetite, multi-asset mutual funds can provide exposure to a diversified portfolio comprising equity, debt, gold, and international equity. These funds offer the potential for higher returns and the benefit of indexation tax treatment, which can help reduce tax liabilities. Multi-asset mutual funds exhibit lower volatility than equity-focused funds, providing a balanced investment approach.

Matching Investment Objectives And Time Horizon:

Arijit Sen, a Sebi-registered investment advisor and co-founder of Merry Mind, a Kolkata-based financial advisory firm, advises investors to consider longer tenures for FDs only if they align with their investment objectives and time horizons. While interest rates may stabilize, evaluating your investment goals and ensuring that your chosen investment avenue matches your financial aspirations is crucial.

As the FD rate hikes are expected to halt, it is a good time to reassess your investment portfolio. Locking into favourable FD rates can provide stability and income generation, especially for long-term tenures. However, exploring alternative options such as debt mutual funds and multi-asset mutual funds is also important to achieve higher returns. Ultimately, understanding your investment goals, risk tolerance, and time horizon will guide you in making informed decisions about your investment portfolio in the current interest rate environment.

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