 "RBI rate cut ends FD appeal for now: Here's what investors can do next")
The Reserve Bank of India’s move to cut the repo rate by 25 basis points to 5.25 per cent on December 5 has set the stage for a new phase in deposit returns. This fourth cut since February is expected to nudge banks towards lowering fixed deposit (FD) rates, affecting risk-averse savers and senior citizens who depend on steady interest income.
“Banks have cut rates across tenures, with the steepest compression in the one-to-two-year segment. High-yield FDs are now scarce, and another round of easing will push peak rates even lower,” said Adhil Shetty, CEO, BankBazaar.
RBI rates Cut Impact on FD
The cut, announced by RBI governor Sanjay Malhotra, may not trigger an immediate reduction in FD rates, but banks are likely to adjust their cards in the coming weeks, especially for short and medium tenures.
“For conservative savers and retirees, this is the moment to lock in longer tenures and preserve the remaining high-yield slabs before they disappear. Senior citizens still enjoy up to 50 basis points premium over regular rates,” said Shetty.
Investment strategy
Investment advisers say a laddering approach can help in a falling-rate cycle. By dividing money across different tenures, savers can keep liquidity while ensuring that not all deposits are renewed at lower rates. This spreads interest rate risk and provides access to periodic maturities.
Points to consider:
• Break deposits into multiple tenures to manage rate swings
• Keep some liquidity through staggered maturities
• Review the mix of bank FDs, corporate FDs and government-backed options
• Match choices with risk appetite, goals and time horizon
Financial advisers also suggest looking at alternatives such as corporate FDs, debt mutual funds and government securities. These may offer higher returns but come with different levels of risk, making due assessment important.
“The cut in the repo rate by the RBI once more signifies the end of very appealing fixed deposit returns for FD investors, at least for a while. Don’t panic; instead, this is the right moment to act wisely,” said Siddharth Maurya, Founder and Managing Director, Vibhavangal Anukulakara Pvt Ltd.
“For example, you can consider FD laddering as a practical measure: divide your money among various periods so that not all the deposits grow at today’s lower rates, and at the same time, there are some maturities which are always coming up to get the better rates if the cycle turns. This way, senior citizens can also opt for a combination of bank FDs, a few corporate FDs, and small savings schemes to get a blend of safety and slightly higher yields rather than sticking to a single product,” said Maurya.
“Senior citizens can choose a combination of bank FDs, high-rated corporate FDs, and small savings schemes for safety with slightly higher yields instead of depending on just one product,” said Shashank Gupta, Director, RPS Group.
Effect on borrowers
A rate cut brings some relief for borrowers. For a Rs 35 lakh home loan over 20 years, the monthly EMI will drop by about Rs 1,850.
Repo cuts often move swiftly into deposit rates as banks’ cost of funds eases. As pressure reduces, banks do not need to offer aggressive returns on FDs. The most competitive one- to two-year slabs have already begun softening. “For risk-averse savers and retirees, this is a moment to act, not wait,” said Shetty.
Meanwhile, Vivek Iyer, partner and financial services risk advisory at Grant Thornton Bharat, suggested that the rate cut offers opportunities across other asset classes like mutual funds. Depending on their risk appetites, the investors can reallocate the portfolio from FD to mutual funds.
What are the highest FD rates right now?
Bank FD rates: Take a look at the highest returns, top tenures and slabs (Dec 2025), provided by Paisabazaar.
Small finance banks
ESAF Small Finance Bank
Highest interest: 7.60%
Highest slab tenure: 444 days
Other tenures and rates:
1-year: 4.75%
3-year: 6.00%
5-year: 5.75%
10-year: 5.75%
Jana Small Finance Bank
Highest interest: 8.00%
Highest slab tenure: 5 years
Other tenures and rates:
1-year: 7.25%
3-year: 7.50%
5-year: 8.00%
10-year: 6.50%
slice Small Finance Bank
Highest interest: 7.75%
Highest slab tenure: 18 months 1 day to 18 months 2 days
Other tenures and rates:
1-year: 6.25%
3-year: 7.50%
5-year: 7.00%
10-year: 6.50%
Suryoday Small Finance Bank
Highest interest: 8.00%
Highest slab tenure: 5 years
Other tenures and rates:
1-year: 7.25%
3-year: 7.25%
5-year: 8.00%
10-year: 7.25%
Private sector banks
Bandhan Bank
Highest interest: 7.20%
Highest slab tenure: 2 years to less than 3 years
Other tenures and rates:
1-year: 7.00%
3-year: 7.00%
5-year: 5.85%
10-year: 5.85%
DCB Bank
Highest interest: 7.20%
Highest slab tenure: 37 months to 38 months
Other tenures and rates:
1-year: 6.90%
3-year: 7.00%
5-year: 7.00%
10-year: 7.00%
RBL Bank
Highest interest: 7.20%
Highest slab tenure: 18 months to 3 years
Other tenures and rates:
1-year: 7.00%
3-year: 7.20%
5-year: 6.70%
10-year: 6.70%
SBM Bank India
Highest interest: 7.10%
Highest slab tenure: Above 15 months to 3 years 2 days
Other tenures and rates:
1-year: 7.00%
3-year: 7.10%
5-year: 7.00%
10-year: 7.00%
Public sector banks
Bank of India
Highest interest: 7.20%
Highest slab tenure: 450 days (Star Swarnim)
Other tenures and rates:
1-year: 6.25%
3-year: 6.25%
5-year: 6.00%
10-year: 6.00%
Bank of Maharashtra
Highest interest: 6.65%
Highest slab tenure: 500 days
Other tenures and rates:
1-year: 6.20%
3-year: 6.20%
5-year: 6.10%
10-year: 6.10%
Central Bank of India
Highest interest: 6.75%
Highest slab tenure: 2222 days; 3333 days
Other tenures and rates:
1-year: 6.40%
3-year: 6.25%
5-year: 6.25%
10-year: 6.25%
Indian Overseas Bank
Highest interest: 6.70%
Highest slab tenure: 444 days
Other tenures and rates:
1-year: 6.60%
3-year: 6.20%
5-year: 6.20%
10-year: 6.20%