Understanding the RBI rate pause and its impact on your fixed deposit (FD) returns

RBI Governor Sanjay Malhotra announced that the Monetary Policy Committee (MPC) has unanimously voted to keep the policy repo rate unchanged at 5.5%. Accordingly, the Standing Deposit Facility (SDF) rate remains at 5.25%, while the Marginal Standing Facility (MSF) rate and the bank rate stay at 5.75%. The MPC has also chosen to maintain its neutral stance.

For FD investors, this signals a crucial decision point. Many have been waiting on the sidelines, expecting higher FD interest rates in the near future.

Personal Finance experts are now urging conservative investors to consider locking in current FD rates, especially on longer tenures, as they might not see substantial improvement if the central bank continues its wait-and-watch approach.

Are FD rates going to fall further?

  Most banks have already trimmed their FD rates in response to previous repo rate cuts.

Why FD laddering makes sense now

FD laddering is a smart and practical investment strategy where you divide your FD investment into multiple parts, each with different maturity periods, instead of investing the entire amount in a single long-term deposit. This approach offers several advantages.

• First, it helps you maintain liquidity, as a portion of your investment matures at regular intervals

• Second, it allows you to benefit from rising interest rates over time, as you can reinvest the matured amounts at potentially higher rates.

• Third, it helps reduce reinvestment risk, since you're not locking in your entire investment at one interest rate.

Several Indian banks are providing attractive FD interest rates as of late 2025. When compared to larger public and private sector banks, small finance banks continue to offer the greatest FD returns.

For instance, banks such as Slice, Unity, Suryoday, and Utkarsh Small Finance Bank provide interest rates between 8% and 9%.

However, major public sector banks like SBI and PNB, as well as private banks like HDFC and ICICI, are providing somewhat cheaper rates.