Nikhil Kamath on why banks don’t attract money

The current economic climate doesn’t augur well for high fixed deposit [FD] rates. So far, the Reserve Bank of India has kept key rates unchanged — repo, reverse repo, MSF rate, and bank rate — as it maintains an ‘accommodative stance’ to mitigate the impact of the ensuing Covid-19 pandemic. The ripple effect is that “you can’t put your bank money in a fixed deposit (FD) anymore,” says Nikhil Kamath, co-founder of Zerodha and True Beacon.

Speaking to Fortune India, Kamath says that we are accustomed to 7% to 8% returns on our bank FDs. “And now, when it says 4% and inflation is 4.5% to 5%, it [FDs] doesn’t make sense,” says Kamath. “Banks have lost the power to attract money like they once had with just that FD rate,” he adds.