Fixed deposit rates

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Achyuth (Querist)
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12 March 2014 In general the fixed deposit rates are higher for long period but in some cases for many banks the fixed deposit rates for 5 years are lower compared to 3 years. What is the reason behind this ??? please help

Nikhil Kaushik

Nikhil Kaushik (Expert)
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18 March 2014 well interest rates are a function of Asset - Liability mismatch. The banks fix rates on Fixed Deposits in order to attract deposits in various time buckets.

Now, if the bank has more demand in 2-3 years and less in 4-5 years, then it will fix interest rate high in 2-3 year FD bucket and less in 4-5 years bucket. This would help in raising more deposits in 2-3 years bucket as higher interest will act as incentive to depositor.

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