I got an email from someone who asked if NRE interest rates are likely to go up in the future and that really surprised me. For more than a year now people have been leaving comments here saying that interest rates have peaked and they can’t go any higher, and you should make hay while the sun shines and invest in fixed income instruments as soon as you can.
By and large that has been true as there have been some really good yields available to investors all of last year and continues to be available even now. What has not been true is the expectation that interest rates will come down.
When RBI revised the Repo rate last time, I thought that might prompt banks to lower rates more than they actually did. In many cases banks kept their highest interest rates still available but at a shorter maturity and I think in one or two cases banks haven’t reduced the rates at all.
Given that the RBI has said they are in no hurry to reduce rates further and how nothing indicates that the macro economic environment of relatively high inflation and high government borrowings will moderate – I think it’s safe to assume that interest rates will hover around these levels for a few more months.
But I don’t really see how there could be a big spike in interest rates in the next few months, and I wouldn’t wait to make a fixed deposit in the hopes of getting a higher rate. While you may get 25 or 50 basis points more – I don’t think it is wise to wait because the rates may as well come down from here.
If you want to invest in fixed income, there are good options right now in terms of tax free bonds, fixed deposits and there are quite a few FMPs that get announced every other week or so.
I don’t see any good reason to wait, do you?