Large Private Sector Bank That Offers 7% Interest On FDs, Should You Invest?

A look at interest rates of Yes Bank

Should you invest in the fixed deposits of Yes Bank?

Yes, there have been problems at Yes Bank in the past and there was a moratorium on withdrawals as well. However, that looks like a thing of the past. The government, the public sector banks and private sector large banks have in the past taken over banks. We have cases like Global Trust Bank being amalgamated with Oriental Bank of Commerce, Centurion Bank of Punjab being taken over by HDFC Bank and Bank of Rajasthan being taken over by ICICI Bank. We are not saying that some of them were problematic, though Global Trust Bank was bailed out.

State Bank of India picking a stake in Yes Bank and the latter also raising funds by way of QIP, is some sort of comfort to depositors. We believe that Yes Bank looks safe at the moment for deposits. In any case what we suggest is that look to invest amounts less than Rs 5 lakhs, given that there is an insurance cover for deposits and savings accounting aggregating Rs 5 lakhs.

Go for the short term fixed deposits

We suggest that investors look to invest in fixed deposits for a tenure that is 1 to 2 years. Our own belief is that interest rates are trending higher, given where inflation is at the moment. So, there is a high possibility that the Reserve Bank of India may hike interest rates going forward and there could be some upward movement in interest rates. However, the hikes could only be marginal and not very much in the next 1-2 years. Interest rates dropping from here, looks highly unlikely.

Investors can also look at other options like company fixed deposits, which are offering marginally higher interest rates. Interest rates on post office deposits have also dropped over the last few years, in line with the general downtrend of interest rates. For retired folk the options at the moment are not too many as government owned banks are offering interest rates of as low as 5.5%.