RBI MPC meat: set for falling fixed deposit rates repo rate; What should FD investors do now?
New Delhi: The Reserve Bank of India (RBI) on Friday increased the repo rate from 50 basis points to 5.5%, marking its third rate cut this year. Also, the Cash Reserve Ratio (CRR) has also reduced from 1% to 3%, which has been injected into the banking system of Rs 2.5 lakh crore. While this step brings relief to the borrowers – home, auto and other loans are expected to be cheaper soon – this is a concern for fixed deposits (FD) investors. Since banks start broadcasting the repo rate cuts, FD interest rates are likely to fall further in the coming months.
What is the repo rate?
The repo rate is the interest rate on which the Reserve Bank of India (RBI) pays money to banks for short -term needs. When the repo rate decreases, banks can borrow money at a cheap rate. This often leads to low fixed deposits (FD) interest rates for customers.
Why FD rates are falling
After two first cuts of each 25 basis points in each of February and April, the latest steps have inspired banks to cut FD rates even more aggressively. According to a research by SBI, “FD rates in the range of 30–70 bps from February 2025 have been reduced.” Although FD rates are not directly connected to the repo rate, they are affected by this through changes in marginal costs (MCLR), which banks use to determine interest rates.The co-founder of India said, “Banks have fixed the rates fixed for rapidly to broadcast this rate cut.
What should FD investors do now?
1. Lock in current FD rates: FD rates are still relatively attractive in many banks, some small finance banks offer 8% or more. Investors should consider locking at these high rates, before the banks modify them down.2. Opt for moderate to long term FD: Since short -term FD rates may soon fall, long -term deposits can help lock in high returns for long periods, especially expected to be low in interest rates in the near future.3. Explore corporate FDs with caution: If you are ready to take some risk for high returns, corporate FD can be an option. They usually offer better rates than traditional bank FDs, but they also come with high risk, so review the company’s credit rating and financial health before investing.“For depositors, the 50 BPS repo rate cut cannot reduce FD rates overnight, but it indicates the onset of trend downwards. Banks are likely to start trimming the deposit rate, especially for short and medium -term tenure. If you are waiting to lock at current rates, some of which can still be around 7.5%, which can still be around 7.5%, which is still there, which is a extra 25, which is still there, which is a extra 25. CEO, which can enjoy an additional 25, bankbazaar.com.
