RBI Monetary Policy: Repo rate unchanged. Should investors wait or book FDs?

The Reserve Bank of India (RBI) on Friday said the policy repo rate remains unchanged at 6.5%, as RBI governor Shaktikanta Das announced decisions taken at the central bank’s fifth monetary policy meet of the year, held from October 4-6.

Representational Image
Representational Image

This marks the fourth consecutive policy meet at which the RBI’s 6-member Monetary Policy Committee (MPC), headed by the RBI governor, kept the repo rate unchanged.

The decision, Das noted, was ‘unanimous.’

Now, most fixed deposit (FD) investors may want to know if there will be any further change – whether hike or cut – to the repo rate. Should they book their FDs now or wait for some more time.

What is repo rate and fixed deposit?

The former is the interest rate at which the RBI lends money to banks, which, in turn, lend the sum to an end user. The latter, on the other hand, is an amount you put in your bank for a fixed period and at an agreed interest rate. At the end of the fixed period, you receive the amount invested plus the compound interest.

How are these connected?

If the former is hiked (by RBI) the latter too gets raised (by individual banks). Similarly, if the former is slashed, the latter also sees a dip.

What should FD investors do?

According to Economic Times, FD investors must not wait for the interest rates to be raised. While the publication did not completely rule out a further hike to the rates, it noted that the likelihood for this is ‘low.’

The RBI, it said, could be compelled to up the repo rate only if inflation remains remains above 6% for a considerable period.

Any more MPC meet this year?

The panel’s final meeting of 2023 will be held from December 6 to 8. Its last meeting for the 2023-24 financial year, however, will take place in February 2024.

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