Hello friends,
I am doing good, and I hope that you are having a good time with your near and dear ones.
Bank is a financial institution that is very helpful for us to facilitate monetary transactions. I mean to say we need a bank account to perform various financial transactions that can be for different nature. Now the bank account has got more features and use cases and this is why it is not just limited to keeping the money instead it is used more for spending. We have many options in the online world where payment can be done using the bank account directly. We also have the option to use a debit or credit card but for that also we need a bank account for the proper usage.
My bank has increased interest rate on its fixed deposit for certain terms. I got the update over WhatsApp and thought that it was just my bank which is done it but I was wrong because I saw more banks doing the same. I thought of figuring out the region behind it and then I got to know why it is happening. In India, we have the Reserve Bank of India, also known as RBI and it's a government body. This is one of the authorities that manage all the financial institutions in India and they must abide by the guidelines created by RBI.
RBI announced different repo rates and some updates every quarter. Based on this update bank announced the changes in its mortgage loans and also on the fixed deposits but RBI has not increased the repo rate in the last two quarters. It simply means that the repo rate has not been changed in the last six months and because of that banks are trying to increase the interest rate for more liquid money.
In simple terms, we can understand that when the government needs more liquid money then they try to increase the interest rate. When the interest rate is increased on deposits more people try to invest in bank deposits. I agree that now we have so many options to invest and probably we can get way higher interest there as compared to the bank deposits. But there is a catch senior citizens are not aware of all these instruments and they are more familiar with the traditional banking system. Even if the interest rate is low then they are not going to sit as the bank is the best place for them to invest their money.
With the increase in bank deposits, it is going to help a lot of depositors who believe in the bank system. Even I do invest in fixed deposits when I have excess money. This is the first option to get some returns on the investment but it is not so high that I know. There is no point in keeping the money idle and still, it is one of the popular methods for investment among investors. Especially the senior citizens who are getting pensions or some other source of income they prefer to invest and keep their money in the bank and not in other form of investment options.
Thank you
Peace @mukund123