06-06-2025
Last Chance To Lock Your FD At Higher Rates: Here's What Investors Must Know After RBI Rate Cut
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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.
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.
Many top banks are still offering FD rates in the range of 6.5% to 7.25% for longer tenures (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
Senior citizens still enjoy an extra 0.50% on FDs. Use this to your advantage and secure stable income before returns drop further.
The RBI on Friday surprisingly announced a 50-bps cut in cash reserve ratio (CRR). 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.
