On 8 October 2021, the Governor of the RBI announced that the projected retail inflation is 5.3% for the current financial year. The Consumer Price Index (CPI) inflation has been lower than expected. Inflation is the rise of the price of goods and services of everyday use, affecting the cost of living. Inflation is necessary for the economy to promote expenditure and reduce savings.
With the projected inflation rates, the returns on bank fixed deposits will earn a negative interest rate. Most banks, including the State Bank of India and many private sector banks, have interest rates lower than the expected inflation rate leading to negative real interest.
Experts believe that occurrence should be expected in a post-recovery stage as the RBI maintains an accommodative stance. For the consumers investing in bank fixed deposits, it might be time to explore other options beyond fixed deposits.
There are options available for investments for risk-averse investors. They can explore schemes offered by the government such as Public Provident Fund, Senior Citizens Savings Scheme, Post Office Recurring Deposit and Sukanya Samriddhi Schemes. These schemes have inflation-beating interest rates along with the security of stability provided by the government. Beyond the government savings schemes, there are alternatives to fixed deposit schemes such as debt mutual funds, liquid funds, equity funds, and corporate fixed deposits.
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