Your fixed deposits may give higher returns after RBI hikes repo rate

Your equated monthly instalments (EMIs) may go up marginally after the Reserve Bank of India (RBI) hiked the rate at which it lends to banks fearing that inflation would choke growth in the economy. However, the central bank maintained a neutral stance which means that there is a low possibility of another hike when it unveils its next policy on October 3, 2018.

The hike, it said was necessitated after inflation expectations and risks remained high.

However, banks say that interest rates rise may not be sharp unless there is a huge rush to avail loans. So if you are planning to buy a house or a car, bankers say that it should be availed at the earliest. And if you are an existing customer, you are likely to continue on the same rates until your reset date.

Rajnish Kumar, chairman, State Bank of India, told DNA Money, "We may not hike our lending rates just yet. But certainly lending rates are going to remain stable with no possibility of it coming down. SBI controls about a quarter of the bank credit in the country."

Going forward, your fixed deposits may give higher returns with banks raising FD rates to attract retail depositors.

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On the growth front, both RBI and the government agreed that the Indian economy would grow at 7.4 per cent for 2018-19 but differed on inflation but differed on the inflation trajectory. Urjit Patel, RBI governor, said, "Our mandate is to target the headline. Therefore, while we look at the components that make up the headline. Our focus in terms of the policy choices is to get the headline to 4 per cent. Our legislated target is on CPI headline and our policy is oriented to keep target."

The RBI's resolve to ensure a better customer service and customer grievance redressal mechanism will further get strengthened through the proposed review of internal ombudsman mechanism.

Source: DNA Money