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Current FD interest rates | FD gives Negative Real Interest because of inflation

negative real interest on FD

Bank FD’s real interest would be Negative because of High inflation. It will remain negative till the post crisis repair not be covered. So the FD’s are not the right investment choice for current financial year.

Peoples who are depending on FD interest rates for their future saving are now worried about increased Inflation rate. The Reserve Bank of India (RBI) in its latest monetary policy review has projected retail inflation at 5.3 per cent for the current financial year.

Last week, the RBI said that the Consumer Price Index (CPI)-based inflation is now projected to be at 5.3 per cent for 2021-22.

On basis of this The Fixed Deposit for the next one year would earn NEGATIVE INTEREST.

Taking example of India’s largest lender bank State Bank of India which are offering 5% on FD’s , Will give (-)0.3 % Real Interest.

Real rate of Interest = Actual FD interest given by bank  –  Inflation Rate.”


Top banks which are providing Negative Interest rate


Bank Name

FD Interest rate


Real interest received


5 %


(-) 0.3%




(-) 0.4%




(-) 0.4%




(-) 0.6%




(-) 0.6%




(-) 0.5%


So, why should you Care?

Interest rates on FD in India are now at a record low. This makes negative real returns a significant risk to your FD investments.

Almost all the public sector banks and most private sector banks currently offer interest of 4.5 to 5.5 per cent per annum on a one-year fixed deposit, while inflation is about 5-6 per cent.

Here I explain you this with an example- If you are thinking to buy an Air conditioner of 40000 rs. Now think about that if you are planning to buy it in next year, wait for the better version of AC.

People invest in any investment option to save something for future. Is it logical to postpone your consumption or to save for the future?

Your AC will cost you 42400 @ 6% inflation rate in next year. And your invested amount will be 42000.

So there is no logic in investing in FD, you can’t even afford it in next year. This is what negative interest do to your consumption power.

If you are depending on the income from bank fixed deposits, you need to overcome for negative real rates with safer investment options.


What are the better options for Investment than FD?

However, small savings schemes run by the government offers better return compared to fixed deposit rates of banks. For term deposits 1-3 years, the interest rate offered is 5.5 per cent higher than inflation target. There is natural advantage of moving money from bank FD to government saving schemes as rates are slightly higher. Thus, the real rate of interest is in the positive territory.

“The present average savings deposit rate offered by banks which is around 3% and less than five per cent rate on one year deposit indicates a negative return, not even covering the expected inflation rate.

Investors have to move towards other investment option for future, like Mutual funds. Which are offering on an average 12-17% CAGR on investments. So they can beat the inflation rate and stay into positive side on returns.

Here I am suggesting better options for investment than FD-


1.      Direct Equity


Equity investment night not for everyone but it is the most profitable investment than any other. It is difficult to pick the right stock and entry & Exit time is also crucial.

The only profitable advice is that you should stick for longer period and choose the right stocks. You can check the Best stocks, which would definitely beat the inflation from here-


Best stocks to invest in 2022 for high profit


If you are eager to get high profit on small investment you should move to crypto investment, but remember high profit involves high risk also. Here are some best crypto advise for you to get better profit at minimal risk.


Best Crypto to Invest in 2022 for High Profit


2.    Equity Mutual Funds


If you want to get profits like Equity investment but have fear in choosing stocks then you should go for equity mutual fund schemes.

Equity mutual funds can deliver 10-20 % return on your investment and certainly beat the inflation. The return depends on fund managers capability.


You can check the return on equity mutual funds from here.


3.    Debt Mutual Funds


Debt mutual fund schemes are suitable for investors who want steady returns with less risk. They are less volatile and, hence, considered less risky compared to equity funds. Debt mutual funds majorly invest in fixed-interest generating securities like corporate bonds, government securities, treasury bills, commercial paper and other money market instruments.

Debt mutual funds usually deliver returns in between 7-9 % but they are safer investment option than Equity based Mutual funds.

If you are planning to invest your savings and bonuses you can choose the diversify plan of investment from Here


Where to invest Lumpsum amount with diversification plan


4.    National Pension Schemes


The National Pension System (NPS) is a long term retirement focused investment plan managed by the Pension Fund Regulatory and Development Authority (PFRDA). The minimum annual contribution for an NPS Tier-1 account has been reduced from Rs 6,000 to Rs 1,000. It is a mix of equity, fixed deposits, corporate bonds, liquid funds and government funds. Based on your risk appetite, you can decide how much of your money can be invested in equities through NPS.

NPS gives approx. 9-12% annual return but you can’t withdraw your money before maturity.


5.    PPF (Public Provident Funds)


PPF interest rates are fluctuating every quarter because government decides it.

However, average returns in PPF is around 7-9%, which you get on a time span of 15 years.

So if you are thinking about investing for future, PPF can be a choice because it is completely risk free option.


6.    Pradhan Mantri Vaya Vandana Yojana (PMVVY)


PMVVY is for senior citizens, to provide them an assured return of 7.4 per cent per annum. The scheme offers pension income payable monthly, quarterly, half-yearly or yearly as opted. The minimum pension amount is Rs 1,000 per month and maximum Rs 9,250 per month. The maximum amount that can be invested in the scheme is of Rs 15 lakh.

Tenure for this scheme is for 10 years and on early death the money will be paid to nominee.


7.    Real Estate


The house where you are living, can’t considered as an investment. The second house, which you buy and use it for secondary income that will considered as investment.

House income is mainly in two forms one is capital appreciation and other is rental income.

To choose the best rental property you can go thru the Article-


Most profitable rental property | How to start Airbnb business


Average return on Real estate investment is around 10-12 % and the rental income is simply depends on the location and your rental business model.


8.    Investment in Gold


Gold investment in the form jewelry is not a good investment. It includes making charges around 6-14%, sometime goes higher as 25%.

Investment in gold coin is more suitable option to beat the inflation but not an secure option.

You can invest in Gold ETFs, which is commonly known as paper gold. Which gives you returns on an average 8-12%.


You can buy ETF’s thru your Demat account and save it same like stocks.


Bottom Line

These suggested options are far better than Bank FDs. It is no worth to invest in FDs because of their decreasing interest rates year after year.

So choose any other investment option as per your risk appetite and make your investment worthy.



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