Last Chance to Lock in High FD Returns! RBI Rate Cut May Trigger a Drop in Deposit Interest Rates

With the Reserve Bank of India (RBI) once again slashing the repo rate by 25 basis points, bringing it down to 6%, investors eyeing high returns on Fixed Deposits (FDs) may be running out of time. The RBI's recent shift in its monetary policy stance from ‘neutral’ to ‘accommodative’ indicates the likelihood of further rate cuts in the coming months—a trend that typically leads to reduced FD interest rates across banks.

Why FD Rates Are Set to Fall

Fixed Deposit interest rates are closely aligned with the RBI’s repo rate, which is the rate at which the central bank lends to commercial banks. When the repo rate drops, banks enjoy cheaper borrowing costs—and eventually, they start passing on that benefit by reducing both loan rates and deposit rates, including those on FDs.

The impact is usually first seen in short- and medium-term deposits, and several banks have already begun adjusting their rates accordingly.

Kotak Mahindra Bank Cuts FD Rates

In response to the latest repo rate cut, Kotak Mahindra Bank has announced a reduction in its FD interest rates by up to 15 basis points on select tenures. This is the first FD rate cut by Kotak since June 2024, and the revised rates came into effect from April 9, 2025.

Other banks are also following suit. Yes Bank recently trimmed its FD rates, and now Equitas Small Finance Bank (SFB) has revised its FD rates for deposits below ₹3 crore. The new rates are applicable from April 7, 2025.

RBI’s Dual Rate Cut Signals a Trend

This is RBI’s second repo rate cut this year, and financial experts believe there could be more in the pipeline if inflation remains within target. As a result, banks are likely to gradually reduce FD rates, making it harder for retail investors to earn high guaranteed returns from deposits.

Last Chance to Lock in Higher Returns

If you're planning to invest in a fixed deposit, now might be the best time to lock in higher interest rates before they begin to decline further. Once banks start aggressively cutting FD rates, especially for shorter terms, new FDs will offer lower returns, directly impacting your income.

Financial planners recommend that investors:

• Book long-term FDs now to secure current higher rates.

• Consider laddering FDs to balance liquidity and returns.

• Compare rates across banks and NBFCs for the best deal.

• Stay updated on further RBI policy decisions in the coming quarters.

How This Affects You

For conservative investors and retirees who rely heavily on FDs for stable, risk-free income, falling rates could mean reduced earnings in the months ahead. The window of opportunity is still open, but narrowing fast. Taking timely action can help safeguard your returns amid this rate-cut cycle.

Bottom Line

With the RBI turning dovish and banks already beginning to lower their deposit rates, this may be your last chance to earn better returns on Fixed Deposits. If you have surplus funds and prefer safe investments, it’s time to act fast—before FD rates dip any further.