As banks lower deposit rates, investors rush to lock money in post offices, govt bonds : Economic Times quotes Credo Capital’s view
“There is a rush amongst investors to lock into longer-tenure products and where there is no announcement of rate cuts so far,” said Vikram Dalal, managing director, Synergee Capital.
“There is no reinvestment risk as you can lock in at a rate as high as 8% for 6 years. It works well for those whose income is not subject to tax or who are in the marginal tax bracket,” said Dalal. The minimum investments amount is Rs 1,000 and there is no ceiling on the upper limit.
“The only drawback of this product is that it is illiquid since they are not traded and cannot be encashed in an emergency.However, investors can opt to take a loan on this product, says Anup Bhaiya, MD, Money Honey Financial Services.
Interest rates on bank fixed deposits fell post demonetisation. Banks like SBI, ICICI Bank, HDFC Bank, Kotak Bank have all cut fixed deposit rates by 15-25 basis points.
“The banking system is flush with liquidity and there are not enough avenues to deploy money .Given this and expected rate cuts, fixed deposit rates could head even lower in the coming months,”says Shankar S, financial planner at Credo Capital.