Earn 8% or more: Lock in your FDs before banks start cutting interest rates

The Reserve Bank of India (RBI) has lowered the repo rate by 25 basis points to 6.25%, a move that could impact fixed deposit (FD) investors as interest rates are expected to fall further. The repo rate is the rate at which the central bank lends to commercial banks, influencing borrowing costs across the economy.

 

With banks likely to adjust their rates downward, fixed deposit returns could shrink in the coming months.

 

Locking in current rates

 

Financial experts advise investors to lock in existing rates before banks make changes.

 

“If you’re planning to open a new FD, consider doing so soon to lock in the current higher interest rates before banks adjust them downward,” said Adhil Shetty, CEO of BankBazaar. Several banks currently offer interest rates up to 8% or more on fixed deposits.

 

 

For example, some banks offer interest rates above 8%. If you lock in at 8% and rates later drop to 7.7% or 7.5%, you will still earn 8% on your fixed deposit.

 

"Locking in an FD means securing a fixed interest rate for a specific period. Once invested, the money cannot be withdrawn before maturity without a penalty. This ensures the investor continues to earn the agreed rate, even if interest rates drop in the future," said Shetty.

 

Take a look at the banks offering higher interest rates, according to PolicyBazaar:

 

Banks with over 8% interest rates for FDs

 

Small Finance Banks:

1. AU Small Finance Bank

Highest slab: 8.10% (18 months)

1-year: 7.25%

3-year: 7.50%

5-year: 7.25%

 

2. Equitas Small Finance Bank

Highest slab: 8.25% (888 days)

1-year: 8.10%

3-year: 8.00%

5-year: 7.25%

 

3. ESAF Small Finance Bank

Highest slab: 8.38% (888 days)

1-year: 6.00%

3-year: 6.75%

5-year: 6.25%

 

4. Jana Small Finance Bank

Highest slab: 8.25% (1 year to 3 years)

1-year: 8.25%

3-year: 8.25%

5-year: 8.20%

 

5. NorthEast Small Finance Bank

Highest slab: 9.00% (18 months 1 day to 36 months)

1-year: 7.00%

3-year: 9.00%

5-year: 8.00%

 

6. Suryoday Small Finance Bank

Highest slab: 8.60% (5 years)

1-year: 8.25%

3-year: 8.25%

5-year: 8.60%

 

7. Ujjivan Small Finance Bank

Highest slab: 8.25% (12 months)

1-year: 8.25%

3-year: 7.20%

5-year: 7.20%

 

8. Unity Small Finance Bank

Highest slab: 9.00% (1001 days)

1-year: 7.85%

3-year: 8.15%

5-year: 8.15%

 

9. Utkarsh Small Finance Bank

Highest slab: 8.50% (2 years to 3 years; 1500 days)

1-year: 8.00%

3-year: 8.50%

5-year: 7.75%

 

Private Sector Banks:

10. Bandhan Bank

 Highest slab: 8.05% (1 year)

 1-year: 8.05%

 3-year: 7.25%

 5-year: 5.85%

 

11. CSB Bank

 Highest slab: 8.00% (501 days)

 1-year: 5.00%

 3-year: 5.75%

 5-year: 5.75%

 

12. DCB Bank

 Highest slab: 8.05% (19 to 20 months; Above 26 months to less than 61 months)

 1-year: 7.10%

 3-year: 8.05%

 5-year: 8.05%

 

13. RBL Bank

 Highest slab: 8.00% (500 days)

 1-year: 7.50%

 3-year: 7.50%

 5-year: 7.10%

 

14. SBM Bank India

 Highest slab: 8.25% (Above 18 months to less than 2 years 3 days)

 1-year: 7.05%

 3-year: 7.30%

 5-year: 7.75%

 

15. YES Bank

 Highest slab: 8.00% (18 months)

 1-year: 7.75%

 3-year: 7.25%

 5-year: 7.25%

 

Foreign Banks:

16. Deutsche Bank

 Highest slab: 8.00% (Above 1 year to 3 years)

 1-year: 7.00%

 3-year: 8.00%

 5-year: 7.50%

 

Corporate fixed deposit rates with over 8% interest rates:

 

1. Shriram Finance

Credit rating: ICRA - AA+/Stable, IND AA+/Stable (India Ratings and Research)

Highest rate slab: 8.47% (50 months; 5 years)

Interest rates:

1-year: 7.59%

3-year: 8.38%

5-year: 8.47%

Additional interest for senior citizens: 0.50%

 

2. Mahindra Finance

Credit rating: CRISIL - AAA/Stable, India Ratings - IND AAA/Stable

Highest rate slab: 8.10% (3 years; 5 years)

Interest rates:

1-year: 7.50%

3-year: 8.10%

5-year: 8.10%

Additional interest for senior citizens: 0.10%-0.25%

 

3. Manipal Housing Finance Syndicate Ltd.

Credit rating: ACUITE - ACUITE A

Highest rate slab: 8.25% (1 year; 2 years; 3 years)

Interest rates:

1-year: 8.25%

3-year: 8.25%

5-year: 7.75%

Additional interest for senior citizens: 0.25%

 

4. PNB Housing Finance Ltd.

Credit rating: CRISIL - AA+/Stable, CARE - AA+/Stable

Highest rate slab: 8.00% (30 months)

Interest rates:

1-year: 7.45%

3-year: 7.75%

5-year: 7.60%

Additional interest for senior citizens: 0.20%-0.30% (Not applicable on 30-month tenure)

 

5. Muthoot Capital Services Limited

Credit rating: CRISIL - A+/Stable

Highest rate slab: 8.38% (5 years)

Interest rates:

1-year: 7.21%

3-year: 8.07%

5-year: 8.38%

Additional interest for senior citizens: 0.50%

 

6. Can Fin Homes Ltd.

Credit rating: ICRA - AAA/Stable

Highest rate slab: 8.00% (3 years)

Interest rates:

1-year: 6.50%

3-year: 8.00%

5-year: 6.75%

Additional interest for senior citizens: 0.25%-0.50%

 

7. Bajaj Finance Limited

Credit rating: CRISIL - AAA/Stable, ICRA - AAA/Stable

Highest rate slab:

8.60% (FD of up to Rs 25,000)

8.40% (FD of above Rs 25,000)

Applicable tenure: 42 months

 

What are the options for investors?

 

While the rate cut could affect depositors, it brings some relief for borrowers.

 

“Banks and financial institutions are required to pass on the benefit of a repo rate cut to borrowers on floating-rate loans linked to the External Benchmark Lending Rate (EBLR), such as home and vehicle loans. This typically results in a reduction in EMIs for such loans,” said Mandeep Mehta, Group CFO at PB Fintech.

 

However, for fixed-rate loans such as personal loans, the decision to lower interest rates rests with individual banks, meaning some borrowers may not see an immediate reduction in their EMIs.

 

With interest rates expected to decline, experts suggest that FDs remain a safe option for investors looking to park funds amid market fluctuations.

 

“The market is going to see some volatility after this rate cut. Fixed deposits would be a good choice to park liquidity for some time, given that stocks and bonds will experience some changes. Further, interest rates are expected to reduce, so it would be worthwhile to lock in deposits at a higher rate while the dust settles,” said Vivek Iyer, partner and financial services risk leader at Grant Thornton Bharat.

 

Larger banks usually adjust their rates more quickly than smaller banks, which may take longer to revise their offerings.

 

“For fixed depositors, any rate changes will affect new deposits, but the interest rates on existing FDs will remain unaffected until maturity,” said Shetty.

 

With further rate cuts not ruled out, investors weighing their options may need to act sooner rather than later.