FD rate cuts: Hunt for returns but keep liquidity needs, safety in mind

Several banks and non-banking financial companies have reduced their fixed-deposit (FD) rates. Conservative investors and retirees, who rely heavily on FDs, need to refine their strategies in a declining rate environment.  

 

Why FD rates are falling

 

Liquidity infusion by the Reserve Bank of India (RBI) has eased funding pressure on banks. “This surplus liquidity has reduced banks’ dependence on high-cost deposits, allowing them to cut rates while maintaining their net interest margin,” says Charu Pahuja, group director and chief operating officer, Wise FinServ.

 

Banks had introduced special FDs to attract deposits. “Now they are discontinuing them or lowering the rates