Repo rate hike, is it the right time to invest in floating FD? What is the opinion of the expert


Floating rate FD interest varies with the change in the benchmark.
In fixed rate, you get an assured rate of interest.
In fixed rate, you are not able to take advantage of the changing interest rates.

new Delhi. The Reserve Bank has increased the repo rate 5 times since May this year. There are two consequences of the increase in the repo rate, which directly affects your pocket. First, the cost of loans has increased. Second, increase the interest on your investment. Today we will do your investment i.e. Fixed Deposit. Fixed Deposits are of two types first Fixed Rate Fixed Deposit and second Floating Rate Fixed Deposit.

Today, when the repo rate is being increased continuously by the RBI, people feel that investing in floating rate fixed deposits would be more beneficial for them. Is it true? Before knowing which is better between fixed and floating rate, we should know what is the difference between these two.

read this also- If you want to surrender LIC policy before maturity, then know the rules

What is the difference between the two?
In Fixed Rate HD, you will continue to get fixed interest for a fixed period of time. The repo rate increased by RBI will not have any effect on your interest. Here you will get an assured rate of interest and you will know at what speed your investment is progressing. On the contrary, the floating rate will see the effect of fluctuations in the repo rate of RBI or other benchmarks like treasury bill yield. It is not that only you will benefit from floating rate FD. As we said, if it is an FD linked to the repo rate or other benchmark, then the effect of the change in the benchmark will be visible here. For example, if the repo rate increases, then the interest rate on FD will also increase. On the other hand, if the repo rate decreases, then the interest rate will also decrease. While the decrease and increase in the rate on Fixed Deposit FD will not have any effect on your returns.

Is it the right time to invest in floating rate?
Now the question arises whether this is the right time to invest in floating rate FD. Snehal Mota, CEO and co-founder of Finovative, says that floating rate deposits look better because they benefit from rising interest rates. However, there are three risks in this. First, as the benchmark rate increases, the interest rate also increases, but when it falls, the interest rate also decreases. Suppose the benchmark of your FD is 91 days T-Bill. The fall in it will also affect your interest. Secondly, this floating FD is beneficial only when the interest rate is increasing. But, RBI has already increased the repo rate by 225 basis points in 2022. There is very little scope for further growth in this.

Thirdly, it is quite possible that in order not to harm the GDP growth further and to improve it, the RBI may ease the repo rate a bit and bring it down. She further says that investors can put 20% of the total investment of their FD in floating FD, more than that it will not be right to put in floating FD.

Tags: Bank FD, business news, business news in hindi, earn money, Fixed deposits, interest rate, investment tips


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