Let me answer your query pointwise of your question raised.
1. Why some countries have high-interest rates? Some countries offer a 25% interest rate. Is that safe to invest in banks that are in these countries?
A: Many countries have high-interest rates but one needs to understand that high-interest rates do not guarantee good returns as inflation in the economy affects those interest rates. One needs to know that it's the real interest that we need to consider while investing in the bank. The real interest rate is the purchasing power of interest that is calculated by regulating the nominal rate charged after keeping the price rises in the report. When inflation increases, the bank will provide better interest rates so that it can encourage its consumers to save and also keep inflation in check.
Some of the countries with high bank interest and inflation rates are as follows:
a) Argentina – 38% Bank Interest & 31.17% - Average Inflation Rate
b) Zimbabwe – 35% Bank Interest
c) Ghana – 20% Bank Interest & 14.79% - Average Inflation Rate
d) Turkey – 19% Bank Interest & 8.58% - Average Inflation Rate
e) Iran – 18% Bank Interest & 17.37% - Average Inflation Rate
2. On what basis is the interest rate in a bank is decided?
A: Monetary Policy Committee (MPC) is the committee that controls the monetary policy which was formed in 2016 as proposed by Urjit Patel Committee in 2015 and fixes the interest rate with focus inflation to 4%, tolerance to 2%, deciding the bank interest rates and adjusting the money supply in the Indian economy. The committee has 6 members out of which 3 members are from the Reserve Bank of India (RBI) and the other 3 members are appointed by the government.
The interest rate in a bank on deposits: The bank interest rates depend on a range of factors i.e. cost of funds & availability of funds which are decided based on the Marginal Cost of Funds based on Lending Rates(MCLR). Now as the MCLR has 4 major factors which help the bank to raise funds for the market and depending upon their ability, different banks may have a different rate of interest. The final deposit rates are made by looking at the repo rate, CRR, and SLR, etc.
The interest rate in a bank on Loans: The interest rates on loans are decided as Marginal Cost of Funds based Lending Rates (MCLR) plus the factors like the scheme, period of loan repayment, the value of the borrower in the market, etc. The banks usually link the lending rates with Repo Rate or a repurchase rate. They add the risk of premium payment with a repo rate to get the final interest rate on loans.
Now, one needs to understand that the rate at which the Reserve Bank of India (RBI) to different banks or the commercial banks is called the Repo rate. RBI always increases or decreases in basis points (bps), where One basis point means one-hundredth of a percentage point.
3. Which bank in India gives the highest interest rate?
A: As we know that every bank gives interest on our savings bank account deposits every quarter but for their ease, they calculate the interest daily. Many of us keep huge amounts in our savings accounts due to our negligence or poor understanding but financial planners or financial analysts do not encourage people to keep huge sums in their savings accounts as it gives very fewer interest rates. They encourage people to invest their excessive amounts in liquid funds as it gives a higher interest rate which in turn provides better returns on our money.
All Banks Savings Account Interest Rates as of April 2021:
For all Savings Account Interest Rates (Per Annum) = 2.75% - 7.25%
All Banks Fixed Deposit Interest Rates:
For Senior Citizens: 3.75% - 7.75% (7 days to 1825 days)
For Regular customer: 3.25% - 5.50% (7 days to 1825 days)
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