FD Rates: After RBI’s decision, will banks reduce deposit rates? Let’s find out

With this move, banks now have the option to lower their loan interest rates. This could also lead to a decrease in fixed deposit rates, which might impact customers, especially senior citizens, who have been enjoying higher returns on their FDs until now.

The repo rate set by the RBI plays a crucial role in determining how much banks pay to borrow money. When the repo rate is high, fixed deposit interest rates tend to rise, giving better returns on deposits. Conversely, a lower repo rate means reduced FD returns and cheaper loans for borrowers.

The last time the RBI lowered the repo rate was in May 2020, when it dropped by 40 basis points to 4% to help the economy cope with the challenges of the pandemic. Since then, the rate was increased steadily until December 2022, with seven hikes bringing it to 6.5%. The RBI kept it steady at 6.5% from February 2023 until the latest Monetary Policy Committee meeting. Today, they’ve decided to lower the repo rate to 6.25 percent.

The recent 25 basis point cut in the repo rate by the RBI signifies a shift away from the high interest rate environment that has been in place for the last four years. During this period, frequent rate increases led to higher loan costs but also made fixed deposits (FDs) more appealing to savers. As borrowing costs rose, banks had to offer more competitive FD rates to attract deposits and ensure liquidity.

Now, with the latest interest rate reductions, banks might begin to lower their FD interest rates in line with decreasing lending rates. This change could affect investors, particularly those who prefer low-risk options, as they have been enjoying better returns on their deposits. While the effects may not be felt immediately, a gradual decline in FD rates from banks is likely.

Punjab National Bank

Starting January 1, PNB has launched new FD tenures of 303 days at 7% interest and 506 days at 6.7%. For the general public, FD rates range from 3.50% to 7.25%, with the top rate of 7.25% available for a 400-day tenure.

Shivalik Small Finance Bank (SFB)

On January 22, Shivalik SFB updated its FD rates, offering interest rates from 3.50% to 8.80% for the general public and from 4% to 9.30% for senior citizens.

Karnataka Bank

Karnataka Bank revised its FD rates for the general public on January 2, with rates ranging from 3.50% to 7.50%. The highest rate of 7.50% is offered for a tenure of 375 days.

Union Bank Of India

Effective January 1, Union Bank has adjusted its FD rates, which now range from 3.50% to 7.30%. The maximum rate of 7.30% applies to a tenure of 456 days.

Axis Bank

From January 27, Axis Bank will offer FD rates between 3% and 7.25%, with the highest rate of 7.25% available for tenures from 7 days to 10 years.

Federal Bank

On January 10, Federal Bank updated its FD rates, providing a range from 3% to 7.50% for ordinary citizens. The top rate of 7.50% is available for a tenure of 444 days.