Lock in fixed deposits before rates fall

FDs of multiple maturities will reduce reinvestment risk

- SAIKAT NEOGI

AS INTEREST RATES are likely to fall, it may be a good time to lock money into top-rated corporate deposits for higher yields. Risk-averse depositors can even look at deposits of small finance banks (SFB) to earn higher returns than that offered by state-owned and major private sector banks.

While interest rates of corporate deposits are 150 to 200 basis points (bps) more than that of fixed deposits (FDs) of public sector banks, that of SFBs are 100 to 150 bps more.

Experts suggest depositors look at FDs of multiple maturities, preferably three years and above, which can help them to reduce the reinvestment risk arising from interest rate fluctuations.