RBI’s Big Move: Third Rate Cut in a Row
In a shocking but overdue action, the Reserve Bank of India (RBI) has slashed repo rates by 50 basis points to lower repo rate to 5.5%. This would be its third rate cut during 2025. Good news for home buyers and car buyers taking loans – hopefully, their EMIs will decrease, and fresh buyers might get even better terms.
But while the lenders are grinning, fixed deposit (FD) investors might not be so happy.
FD Investors at Losing End
With falling interest rates, fixed deposit returns also fall. That is what is happening today.
In 2025 itself, the RBI till date has reduced the repo rate by a combined total of 100 basis points. Ever since, large banks have been reducing FD rates. As per SBI Research, between February 2025 and now, FD rates fell by 30 to 70 basis points.
Let’s look at a simple example. An FD for one year that yielded 7% now yields 6.5%. On a deposit of ₹10 lakh, this amounts to ₹5,000 less as interest on an annual basis. To conservative investors and senior citizens, the difference can be a gut blow.
What Should You Do Now?
Deepak Kumar Jain, InvestManager.in CEO, believes that during a declining rate scenario, simply banking on FDs is equivalent to accepting substandard returns. “The direction in which things are headed, we might have FD rates remaining below 7% for an extended period. Investors will have to rethink their strategy,” he cautions.
Trivesh D, Tradejini’s COO, concurs. “If you’ve already invested your money in high-rate FDs, you’re good to go. But if you’re making a fresh deposit, do it fast before rates fall further,” he says. He also suggests not keeping all your eggs in the same basket.
Try These Smart Alternatives
Rather than maintaining strict FDs, diversify. Mutual debt plans, i.e., target maturity and short-duration funds, are becoming increasingly popular. They provide greater liquidity and even superior post-tax yields in some instances over FDs.
FDs, of course, remain on the scene, and they are ideal for risk-averse investors. But in this low-interest era, introducing some vitality to your portfolio with mutual funds or bonds could prove a healthier mix of safety and returns.
Bottom Line
Cut in RBI rate relief to consumers but a bane for depositors. For investors, the word is clear, don’t do it again. Review your plans, survey your options, and make an effort to get ahead of the game.