Last Updated:June 06, 2025, 12:05 IST
RBI cuts the repo rate by 50 bps to 5.5%. This is expected to reduce FD interest rates also. Here’s what investors should do now.
Banks usually revise their deposit and lending rates after a rate cut by the RBI — but not instantly. This gives investors and borrowers a short window to act.
With the Reserve Bank of India (RBI) on Friday slashing the repo rate for the third time in a row, this time by a huge 50 basis points to 5.5%, this is not good news for FD investors — the interest rates on fixed deposits are likely to fall soon.
If you’re planning to put your money in fixed deposits for steady income, this could be your last window to lock in a decent FD rate before they fall further.
Why This Could Be the Last Chance
Banks usually revise their deposit and lending rates after a rate cut by the RBI — but not instantly. This gives investors and borrowers a short window to act.
The RBI in the two previous monetary policy reviews already reduced the repo rate by 25 bps each in February and April. Following this, banks also followed and cut their deposit and lending interest rates.
However, many top banks are still offering FD rates in the range of 6.5% to 7.25% for longer tenures (more than 5 years), but this may not last long. In a falling interest rate cycle, new FDs will offer lower returns, and even reinvested FDs might earn less than before.
“So, if you’re planning to invest in FDs or have a maturing FD soon, this may be your last opportunity in 2025 to lock your money at a higher rate for the next few years,” said a banker, who did not want to be named.
What Should You Do Now?
Lock in Long-Term FDs
If your bank is still offering 7% or more for 3- to 5-year tenures, consider locking a portion of your funds at that rate. Once rates fall further, you won’t get such offers easily.
Use FD Laddering Smartly
To keep some flexibility, divide your FD into chunks with different maturities (say 1, 2, 3, and 5 years). This way, if rates rise again in the future, you can reinvest some part at better rates without breaking the whole deposit.
Check Senior Citizen Benefits
Senior citizens still enjoy an extra 0.50% on FDs. Use this to your advantage and secure stable income before returns drop further.
How To Take Advantage Of 50-Bps CRR Cut?
The RBI on Friday surprisingly announced a 50-bps cut in cash reserve ratio (CRR). In December 2024 also, the RBI had also cut the CRR by 50 bps to 4 per cent.
An expert recommends investors to invest in tenure ranging 3-month to 3-year bond schemes to take advantage of CRR cut.
Marzban Irani, CIO of fixed income at LIC Mutual Fund, said, “CRR cut will bring down (bond) yields at shorter end significantly. RBI has reiterated that it is committed to ensure price stability and is focused on supporting growth. Any further policy decisions will continue to remain data dependent. Recommended to invest in tenure ranging 3 month to 3 year schemes to take advantage of CRR cut.”
In a surprise move, the RBI’s Monetary Policy Committee (MPC) has decided to cut the key repo rate by 50 basis points (bps) to 5.5 per cent, RBI Governor Sanjay Malhotra announced on Friday. With this, the repo rate is the lowest level in nearly three years.
The RBI also announced a surprise reduction in CRR by a significant 100 bps to 3 per cent, in four tranches of 25 bps each, beginning September 2025. It is expected to infuse Rs 2.5 lakh crore into the banking system in the coming months.
Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to markets, economy and companies. Having a decade of experience in financial journalism, Haris has been previously asso…Read More
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to markets, economy and companies. Having a decade of experience in financial journalism, Haris has been previously asso… Read More
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