Hunt for high returns but keep liquidity needs, safety in mind

Several banks and non-banking financial companies have reduced their fixed-deposit (FD) rates.

- HIMALI PATEL

Conservative investors and retirees, who rely heavily on FDs, need to refine their strategies in a declining rate environment.

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 on them," says Santosh Agarwal, chief executive officer (CEO), Paisabazaar.

With inflation moderating, the RBI cut the repo rate by 25 basis points in February. Another similar cut is expected on April 9. "The ongoing policy easing by the RBI has also led banks to reduce their lending and deposit rates," says Adhil Shetty, CEO, Bankbazaar.com.