State Bank of India (SBI) Chairman of RBI Dinesh Kumar Khara has said that interest rates on FDs are at their peak and are expected to come down in the medium term. The country’s leading public sector bank also said that the Reserve Bank of India (RBI) may start easing the interest rate cycle from the third quarter of the current financial year. Last week, RBI kept its key policy rate repo unchanged for the eighth consecutive time, focusing on inflation amid strong economic growth. Khara said, ‘We hope that in the third quarter starting from October, there will probably be some possibility of retail inflation moving towards four percent, and that will be the right time when we can expect some reduction in the policy rate from the Reserve Bank.’ That is, interest rates on FDs may be reduced from October. After reducing the repo rate, banks will also reduce interest.
Many central banks started reducing interest rates
Some central banks in advanced economies such as Switzerland, Sweden, Canada and the euro zone have already started a cycle of reducing rates through the year 2024. On the other hand, market expectations of interest rate cuts by the US Federal Reserve, which were high earlier, have now subsided. As far as interest rates in the banking system are concerned, Khara said these have more or less already peaked. “Going forward, we will see some minor changes,” he said.
Increase in interest rates
I think, if we look at the medium-term trajectory of interest rates, it will probably be in a downward trend.” Last month, SBI had increased interest rates on select short-term maturity term deposits by up to 0.75 percent. Under retail term deposits, the interest rate on 46-179 days deposits has been increased by 0.75 percent to 5.50 percent. Earlier it was 4.75 percent.
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