With banks reducing FD rates, investors are advised to fix today’s rates by either locking them in, lowering (or ladders) horizon or finding other investment options.

6 June 2025, New Delhi

The Reserve Bank of India (RBI) announced a 50 basis points cut in its repo rate to 5.5%. This is the third consecutive cut of 2025 and a total of 100 bps cut since February. The RBI has shifted its policy stance from ‘accommodative’ to ‘neutral’, hinting that there will be no more aggressive cuts(potentially) in the near future.

This cut is intended to spur growth; the cuts will be challenges for fixed deposit (FD) investors, as banks will likely hike up any FD interest rates following this (the rate cut). In a recent report by SBI Research, SBI PLUS FDs have already declined in interest by 30-70 bps since February 2025.

FD Investors Face:

• Falling FD Rates: With the cuts by the RBI, banks have been cutting FD interest rates as well. For example, Suryoday Small Finance Bank cut 5-year FD rates from 8.6% to 8% from 1 June 2025.

• Savings account rates from banks have also reduced to at 2.7% rates or reduced their interest rates in some cases below there as well. So, these declined rates overall affect the return for depositors.

• Senior citizens: Long-term FDs, a preferred investment for retirees may continue to be further reduced.

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