Senior citizens and others who are depending upon income from bank FDs schemes will be at the receiving end with the retail inflation exceeding the interest rates. The Reserve Bank of India (RBI) projected retail inflation at 5.3 per cent for the current financial year, in its latest monetary policy review.
A few days before, the Reserve Bank of India said that the Consumer Price Index (CPI) – based inflation is projected to be at 5.3 per cent for 2021-22 with risks evenly balanced. At this level, the FD for one year with the State Bank of India (SBI) would rather earn negative interest. The real interest rate would be (-) 0.3 per cent for the saver.
The real rate of interest = Card rate (-) Inflation rate.
The retail inflation for the month of August is recorded at 5.3 per cent which is an even higher tenure in 2-3 years. The interest rate earned is 5.10 per cent which is lower than expected inflation for the current fiscal.
If we talk about the private sector, HDFC Bank offers a 4.90 per cent interest rate for 1-2 year fixed deposits and 5.15 per cent for 2-3 years. However, small savings schemes being offered by the government gives better return as compared to banks’ fixed deposit rates. For term deposits 1-3 years, the interest rate offered is 5.5 per cent higher than the inflation target.
“A negative rate of interest, for savers on bank deposits, these days, is a reality, which the depositors have to face because of a complex set of factors. The present average savings deposit rate offered by banks which is around 3.5 per cent and less than a five per cent rate on one year deposit indicates a negative return, not even covering the expected inflation rate,” Resurgent India Managing Director Jyoti Prakash Gadia said.