RBI MPC meeting December 2024: The Reserve Bank of India's Monetary Policy Committee (MPC) is convening for bi-monthly review. After three days of review, the committee will release its decision on the outcome, including the repo rate, on Friday. The RBI has kept the repo rate steady at 6.5 percent since February 2023. However, it is widely anticipated that the RBI will maintain the repo rate at the current level of 6.5%, marking the eleventh consecutive meeting without any changes.
RBI rate cut
According to brokerage firm Nomura, there is a possibility of the Reserve Bank of India's Monetary Policy Committee (MPC) announcing a rate cut on December 6, 2024.
Nomura said that the RBI may choose to lower rates by a substantial one percentage point. This decision is supported by factors such as the sluggish GDP growth and a slowdown in credit expansion. The brokerage firm believes that these circumstances necessitate immediate policy adjustments by the RBI.
The Repo rate, set by the RBI, is the interest rate at which commercial banks borrow money from the central bank. A lower repo rate reduces the cost of borrowing for banks, encouraging investment in the country. On the other hand, a higher repo rate increases borrowing costs, leading to lower investment.
In addition to influencing borrowing costs, the RBI uses the repo rate to manage inflation. If the economy is expanding too quickly and prices are rising, the central bank may raise the repo rate to dampen spending. Conversely, during economic slowdowns, the central bank may decrease the repo rate to stimulate spending.
What happens to your FD investment
The Reserve Bank of India's (RBI) repo rate plays a significant role in influencing FD rates. The repo rate dictates the interest that banks pay when borrowing funds from the RBI. A hike in the repo rate typically prompts banks to raise their FD rates in order to attract more deposits. For instance, a 0.25% increase in the repo rate by the RBI may lead banks to adjust their term deposit rates accordingly. Conversely, a reduction in the repo rate by the RBI may result in banks lowering their term deposit rates, which may not be advantageous for investors.
During the October MPC meeting, the RBI shifted its stance from accommodative to neutral, indicating that the current elevated FD interest rates may soon decrease. Investment experts recommend seizing these favorable rates before they decrease, as a potential decrease in inflation could lead the RBI to lower rates in the near future.
Banks revise FD rates
Several public and private banks have changed their fixed deposit rates in preparation for the RBI MPC meeting this week.
Karnataka Bank has recently updated its fixed deposit interest rates for callable and non-callable deposits, effective December 2, 2024. The bank now offers interest rates ranging from 3.5% to 7.50% for general citizens with deposit tenures spanning from 7 days to 10 years. Senior citizens can avail of a higher interest rate of 8% on a 375-day tenure.
Canara Bank has also revised its Fixed Deposit rates for amounts below ₹3 crore, with the updated rates coming into effect on December 1, 2024. The new rates offer a range of 4% to 7.40% for the general public and 4% to 7.90% for senior citizens on callable deposits.
YES Bank recently made changes to the interest rates for fixed deposits below Rs 3 crore, with the new rates taking effect on November 5, 2024. The bank has reduced the interest rate on 18-month fixed deposits from 8% to 7.75% per annum.
IndusInd Bank has recently updated its fixed deposit interest rates for amounts below Rs 3 crore. For regular citizens, the bank offers interest rates ranging from 3.50% to 7.99% for FD terms lasting from 7 days to 10 years. Senior citizens, on the other hand, can benefit from fixed deposit interest rates between 4% and 8.49% for the same tenure range.
IDFC FIRST Bank has also revised its fixed deposit interest rates for deposits below Rs 3 crore, as per information available on the bank's official website. Regular citizens can now enjoy interest rates varying from 3% to 7.90% on deposits maturing within 7 days to 10 years. Senior citizens, on the other hand, are eligible for interest rates ranging from 3.50% to 8.40%.
The highest interest rates of 7.90% for regular citizens and 8.40% for senior citizens are applicable for deposits with a tenure between 400 days and 500 days.