The Reserve Bank of India (RBI) has cut the repo rate for the third time this year by 50 basis points. With the latest cut, the repo rate now stands at 5.5%. The cut in the repo rate brings cheers for borrowers but bad news for fixed deposit investors. The banks have been cutting the FD interest rate as the RBI started reducing the repo rate at the start of 2025. Along with the repo rate cut, the RBI has also cut the Cash Reserve Ratio (CRR) by 1%. There is also a change of stance from accommodative to neutral in today’s RBI MPC meeting.
How has FD rate been impacted since February 2025?
The RBI has cut the repo rate by 25 bps each time in February and April 2025. Due to two successive rate cuts, banks have aggressively reduced FD interest rates.
According to the SBI Research report, “FD rates have been reduced in the range of 30-70 bps since February 2025.”
Along with the reduction in fixed deposit interest rates, banks are also reducing the interest rates on savings bank accounts. “Banks have already reduced interest rates on savings accounts to floor rate of 2.70%,” said SBI in its report.How much FD rate cuts should investors expect in future?
The RBI has cut the repo rate three times till now. According to the SBI research report, “Transmission to deposit rates is expected to be strong in the coming quarters. 100 bps repo rate cuts are expected in FY26.”
This is likely to happen if the CPI inflation remains below the medium-term target of 4%, supporting growth in fighting cyclical downturns, and if credit growth remains muted.
