Will Fixed Deposit Interest Rates be increased in India in 2020?

FD interest rates are likely to fall in the year 2020 due to an upcoming decline in the financial market, as predicted by renowned economists all around the world. To battle this recession, the Central Government of India, along with the RBI, is likely to reduce the prevailing interest rates by reducing the repo rate as well as cash reserve ratio (CRR) and statutory liquidity ratio (SLR), as a way of tackling with a lower aggregate demand level.

A lower interest rate on all forms of deposits is likely to encourage residents to allocate more towards expenditures, effectively boosting the aggregate demand in the economy. On the supply side, a lower interest rate allows producers to avail more loans to increase total production levels as well, to compensate for rising demand. 

Even though fixed deposits are likely to generate lower returns in the upcoming years, it is still one of the most favored forms of investment in India. This is because of the stability guaranteed by such schemes, as they have no ties to the capital sector.

Interest earned on fixed deposits is also relatively higher than most other non-market linked tools, thereby deeming it as one of the highest return generating investment instruments available in the market.