To control inflation, the Government is increasing the rates day by day and now the current rates are one of the biggest in recent times and thus which has improved the FD rates. Yesterday I was trying to book any FD for 1 year and the interest rate I got was 7.25% (this is the highest by my bank). Though there are some of the banks which were paying around 8% too.
FC: BankBazaar.com
Now, this seems to be a lucrative option now because getting above 7% in FD is quite great and good for keeping the emergency fund here. The only problem is that I do not keep much in FD because I have to pay tax on the interest and that too as per my income slab. But still, it is better to keep some money in FD to get the best interest. I am also thinking of creating FD for 5 years because that will give me a Tax saving option as well as a good interest rate because you never know what interest rate I will be getting after 2-3 years.
For all the new earners I am actually telling them to start an FD or RD for their saving journey because that is the time you will be starting a habit of saving and the FD and RD is the most basic and easiest option to start with. And when your FD is matured you can keep that as an emergency fund and remaining you can invest. For me, all my emergency fund is in debt fund and a few of them is getting good interest rate in FD. I have also sent some money to my Wife's account for the FD so that I do not have to pay any tax on the interest earned by her.
I have also advised my parents to renew their FD as both of them are Senior Citizens and the FD rates are above 8% in some banks. So it is great for the pensioner too because they can get a handsome interest rate for their investment and do not have to pay much tax too.
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Yes the rates are increasing a little.
Yes, hopefully it will increase little more :)
This doesn't apply to the FD we already have right?
Yes, we have to cancel our existing FD and open a new one to get a new interest rates