The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points (bps) to 5.25% on December 5.
This is the fourth rate cut since February 2025.
While the move is aimed at boosting economic growth, it will likely impact depositors, especially those who rely on fixed deposits (FDs) for safe, stable returns.
How Deposit Rates Are Affected
RBI governor Sanjay Malhotra announced the cut, but banks may not immediately lower FD rates.
However, short- and medium-term deposits are expected to see reductions soon.
SBI’s highest FD rate under the Amrit Vrishti scheme fell from 7.1% in January to 6.6%.
HDFC Bank’s peak FD rate dropped from 7.25% to 6.6%.
Smaller banks and mid-sized finance companies have reduced rates sharply, in some cases by 150–225 bps.
Experts say FD rates are influenced not just by repo rate changes, but also by system liquidity, competition for deposits, and each bank’s lending and asset management needs.
Investment Strategies for Depositors
The rate cut means depositors should rethink their investment plans:
Laddering Strategy: Divide FD investments across multiple tenures.
This ensures access to funds regularly and mitigates interest rate risks.
Long-Term Lock-ins: Savers and retirees might consider locking in longer-term FDs now while higher rates are still available.
Senior citizens still get a 0.5% premium, but this advantage may shrink.
Alternative Investments: Explore corporate FDs, debt mutual funds, and government securities.
These may offer better returns but come with different risk levels.
Always match investments with your financial goals, risk tolerance, and timeline.
Key Takeaway
The RBI’s repo rate cut is designed to stimulate the economy.
For depositors, it means FD returns may decline, and smart investment planning is crucial.
Consider diversifying across tenures and exploring other investment options to stay ahead in a low-interest-rate environment.
