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Has Demonetization reduced value of Fixed Deposits ?
Ever since the demonetization of old Rs. 500 and Rs. 1,000 notes have taken place, people are coming in large numbers to deposit the defunct currency at banks across India, resulting in deposits of over Rs. 2 lakh crore mark. This has prompted some of the banks to cut fixed deposit rates. Major banks such as SBI, ICICI and HDFC Bank have lowered the fixed deposit rates by up to 0.25 percent. While United Bank of India has also cut the fixed deposit rates by 0.25%-1%. This may not be a great news for those parking their funds in the banks. The question that lingers is – Has demonetization reduced value of fixed deposits.?
Recently, State Bank of India reduced rates on deposits from one year to 455 days to 6.90%, down 15 basis points, while maintaining the 7% rate for deposits between 211 days to one year unaltered.
HDFC Bank has lowered the interest rate by 0.25 per cent across all tenures on bulk deposits that range between Rs 1 and 5 crores.
ICICI Bank reduced the interest rate to 7.10 percent as compared to 7.25 percent earlier on fixed deposits of maturity period ranging 390 days and 2 years.
From the table, you can see the difference in the earning value both pre- and post-demonetization.
For now, it may appear that demonetization reduced value of fixed deposits, but in the longer run, this will balance itself.
Now it's completely up to you to decide the course of action with respect to your fixed deposit portfolio.