After the continuous increase in the repo rate by the Reserve Bank, the banks also increased the two-way interest. On the one hand interest on deposits increased and on the other hand loan interest also increased. During this, the government also increased the interest on small savings schemes thrice.
New Delhi. Due to the increase in interest rates on small savings schemes for three consecutive times, post office FDs have now stood in comparison to bank FDs (Post Office FD vs Bank FD). Under small savings schemes, 6.9 percent interest is being received on two-year fixed deposits in the post office, which is more than the returns received by most banks on FDs of the same period.
This is happening due to increase in the repo rate by the Reserve Bank. Banks started paying more interest on deposits to raise more money. As a result, during May 2022 to February 2023, the average domestic fixed deposit rate (WADTDR) on new deposits of banks increased by 2.22 percent.
Where in the first half of the financial year 2022-23, the emphasis of banks was more on wholesale deposits, then in the second half their priority changed and they paid more attention to raising retail deposits. The increase in interest rates was a part of this. Significantly, during this period, banks also continuously increased the interest charged on loans.
The government also increased the interest rate
The government raised interest rates for small savings schemes (SSI) by 0.1-0.3 per cent for the October-December quarter, 0.2-1.1 per cent for the January-March quarter and 0.1-0.7 per cent for the April-June 2023 quarter. Prior to this, there was no change in the interest rates on small savings schemes for nine consecutive quarters. There was no increase in these from the second quarter of the financial year 2020-21 to the second quarter of 2022-23.
Post office fd giving competition
The Reserve Bank has said that “FD rates of banks are now competing with post office FD rates.” According to the Reserve Bank, the average interest on bank FDs with maturity of one to two years will be 6.9 percent in 2023. It was 5.8 percent in September, 2022.
After increasing the interest rate on small savings schemes for three consecutive times, the 2-year post office FD is now getting a return of 6.9 percent. While this rate was 5.5 percent in September 2022. The country’s largest bank SBI is paying 6.8 percent interest on deposits of more than one year and less than two years.
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