India

Cheer Up! Fixed Deposit Rates May Rise As RBI Aims To Restore CRR

By
OB Bureau

New Delhi: After a year of gloom and downward trend, the interest rate on bank fixed deposits may go up from April as the Reserve Bank of India (RBI) announced the restoration of the Cash Reserve Ratio (CRR) of banks.

In its first monetary policy of 2021, the central bank said that the CRR restoration will be effected in two phases, beginning next month.

RBI Governor Shaktikanta Das said on Friday that CRR will be changed to 3.5% from March 27, 2021, and then to 4% from May 22, 2021. The repo rate, however, was retained at 4%.

It may be noted that CRR was maintained at a 4% level from February 2013 to January 2020. It was reduced after the pandemic set in, leading to a significant fall in bank interest rates.

It may be noted that the RBI had maintained CRR at a 4% level from February 2013 to January 2020 before reducing it by 100 basis points to 3% in 2020, due to the disruption caused by the COVID-19 pandemic.

The central bank has indicated that liquidity may be injected into the system post-restoration of CRR if required.

“CRR normalisation opens up space for a variety of market operations of the RBI to inject additional liquidity,” Das said.

An increase in the interest rate of fixed deposits will be on the cards, but loan rates — including home loans – could go up.

Also Read: RBI Keeps Repo Rate Unchanged After Two Consecutive Cuts

OB Bureau

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