Will RBI's latest repo rate cut impact your FD returns?
What's the story
The Reserve Bank of India (RBI) has cut the repo rate by 25 basis points to 5.25%. This is the fourth reduction in 2025 and indicates a continued easing stance to boost economic growth while keeping inflation in check. However, the move could lead to lower returns on fixed deposits (FDs), especially for senior citizens who rely on them for stable income.
Rate adjustment
Banks likely to adjust FD rates
The RBI's cut indicates that the economy has room to lower borrowing costs without triggering inflation. Saurabh Jain, co-founder and CEO of Stable Money, observed that banks have already cut FD rates by 1-1.5% across popular tenures in response to previous cuts. With this latest reduction, further downward adjustments are likely. Jain advised investors to lock in FDs before banks implement new rates to shield themselves from lower returns in a falling-rate environment.
Rate comparison
Current FD rates across banks
Here's a look at the current interest rates offered by various banks for FDs. Axis Bank offers 3%-6.6% for general public and 3.5%-7.35% for senior citizens, while Bandhan Bank offers slightly higher at 2.95%-7.20% and 3.7%-7.7% for general users and senior citizens, respectively. Other banks like Bank of Baroda, Central Bank of India, HDFC Bank, ICICI Bank also have similar ranges with slight variations in their respective offerings for both general public and senior citizens alike.
Investment strategies
FD laddering and other investment options
Financial advisers suggest depositors should consider FD laddering, which involves spreading investments across different tenures to maintain liquidity while reducing reinvestment risk. Adhil Shetty, CEO and co-founder of BankBazaar, said retirees should consider locking in longer-term FDs while higher slabs are still available. Other investment options such as corporate FDs, debt mutual funds, and government securities may offer better returns but come with different risk profiles.
Market trends
Long-term FD returns may decrease
Shashank Gupta, Director at RPS Group, warned investors to be prepared for lower long-term FD returns as the easing cycle continues. He also suggested FD laddering as a strategy to avoid locking all deposits at current lower rates. Senior citizens can opt for a mix of bank FDs, high-rated corporate FDs and small savings schemes for safety with slightly higher yields instead of relying on just one product.
Portfolio adjustment
Lower deposit rates impact portfolio strategies
Lower deposit rates also affect portfolio strategies. Ankur Jalan, CEO of Golden Growth Fund, said affluent investors and family offices may shift funds to higher-yielding products like real estate-focused funds to preserve real returns. The reduced cost of capital from the rate cut also makes projects more viable for developers, indirectly supporting alternative investment avenues.