Inflation Rates Are Higher Than FD Rates

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.

Join our Telegram channel to keep getting updates on all things finance.

For any clarifications/feedback on the topic, please contact the writer at jyotsna.singh@cleartax.in

You May Also Like

EPFO lowers the interest rate on PF deposits to 8.5% for FY 2019-20

The Employees’ Provident Fund Organisation (EPFO) has notified the interest rate for…

Pensioners Who Opted for Commutation To Receive Higher Pension

According to a notification sent by the labour ministry dated 20 February…

Save Your Tax By Claiming Medical Expenditure Under Section 80D

The current financial year is near to end on 31st March. You…

Here’s What You Should Know About Overdraft Facility

The overdraft facility can be considered as a kind of a loan.…