These are the days for low-interest rates. So this makes it good times for borrowers as they are able to borrow money at really low-interest rates. Homeloans nowadays are available below 7% interest pa (per annum).
RBI had been lowering rates from the onset of the Corona pandemic to support the economy. By bringing interest rates to lower value, it was hoping to give impetus to the businesses by providing them easy low-cost money.
However, this low-interest rate scenario is causing tremendous pain to those retail investors who rely on interest income generated by their fixed deposits or bank savings. These retail investors typically include senior citizens, pensioners, and many small savers. As per the studies Indians are able to save most from their total earnings every month. But most of this saving is parked typically in instruments such low interest-paying bank accounts, fixed deposits, or post office saving schemes. Small savers feel these avenues of parking their hard-earned money safe and hence they don’t think much interest rates they get. Up to a certain extent, this is the very right thing to do, when the safety of capital is of prime importance. In the Union Budget 2020, DICGC insurance offered to these instruments was increased from Rs. 1 lakh to now up to a maximum of 5 lakhs for both principal and interest amount. This definitely adds comport for retail investors when they keep money in savings accounts, fixed deposits.
But there is this one thing which is kind of eating out this saving in front of our eyes, they call it Inflation !!
