Fixed deposit investors take note! Lock in high interest rate FDs before returns fall as RBI cuts repo rate

Are fixed deposits your go to investment option? Then now may be the right time to put your money in FDs as interest rates are likely to come down soon. Fixed deposit investors must take swift action as the interest rate reduction cycle progresses, following RBI's 25 basis points cut in the repo rate during the second MPC meeting on April 09, 2025.
Fixed deposit interest rates are expected to decline further after this latest adjustment. The central bank has implemented its second rate reduction, following a 25 basis points decrease (100 basis points = 1%) during February 2025's monetary policy meeting.
Notably, RBI has shifted its monetary policy stance from neutral to accommodative, indicating potential additional repo rate reductions this year, which could subsequently lower fixed deposit rates.
The impact of rate reductions on short and medium-term FDs will be more immediate, whilst longer-term FD rates may take additional time to adjust. When planning your fixed deposit investment strategy, it is essential to consider the likelihood of future rate reductions.
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For those with available surplus funds, now presents an opportune moment to invest in fixed deposits. Following RBI's repo rate reductions in recent monetary policies, banks have begun lowering their FD rates.
According to Santosh Agarwal, CEO, Paisabazaar, “Depositors having investible surpluses can consider booking FDs offering higher yields, especially those offered for longer tenures. This will allow them to earn higher FD yields even during the falling interest rate regime. Consumers seeking higher FD yields can consider small finance banks and private sector banks, which are still offering FD yields of 8% and above.”
Adhil Shetty, CEO, BankBazaar.com says with large banks, fixed deposit rates are so far holding, with minor adjustments seen in some tenors. “Depositors are advised to lock into higher rates available now. Senior citizens can benefit from additional benefits of 50 bps on most tenors. HNW depositors can benefit from higher rates available on non-callable deposits,” he adds.
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For those interested in short to medium duration FDs, swift action is advisable as elevated interest rates may not persist. However, individuals planning long-term FD investments have additional time to secure current rates.
Risk-tolerant investors can explore small finance banks, which presently offer some of India's most attractive FD interest rates.
But, it’s important to exercise prudence whilst putting money in small finance banks’ FDs. Keep deposits within the Rs 5 lakh DICGC insurance limit per bank account. For sums above Rs 5 lakh, consider distributing investments across multiple banks or maintaining accounts under different capacities to ensure complete insurance protection.