RBI MPC keeps repo rate unchanged: What it means for your fixed deposit

Fixed deposit

• RBI keeps repo rate unchanged at 5.25 percent in first policy review of the year
• FD rates likely to remain stable with limited scope for sharp hikes soon
• Investors advised to compare FD rates and consider alternatives like debt funds

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The Reserve Bank of India’s Monetary Policy Committee (MPC) has kept the repo rate unchanged at 5.25 per cent, maintaining the status quo at its first policy review of the year.

With inflation projections within the RBI’s comfort zone and growth momentum stable, the central bank chose not to alter the policy rate. For fixed deposit (FD) investors, this means continued stability in FD rates, with limited scope for sharp hikes in the immediate term.

What unchanged repo rate means for FD returns

An unchanged repo rate typically signals steady valuation of deposit rates, as banks may not find strong impetus to adjust their interest payouts quickly. Most lenders had already priced in earlier policy moves, and maintaining the status quo suggests FD yields will remain same in the coming months.

What are current FD interest rate by different banks:

That said, fixed deposits continue to offer a safe and predictable investment avenue for conservative savers, particularly those seeking stable income in a low-risk environment.

“A pause in the repo rate sustains the gradual moderation in deposit returns already underway following earlier policy actions. High-yield fixed deposits are becoming increasingly selective, with most mainstream offerings consolidating within a narrower band. While current liquidity conditions continue to support deposit mobilisation, the likelihood of materially higher FD rates emerging remains limited in a steady-rate environment.” said Adhil Shetty, CEO BankBazaar.com.

Where FD investors can look now

FD rates vary across banks and tenors, with top private banks and NBFCs often offering the best yields. Senior citizens can also earn extra interest via special senior citizen FD rates.

Financial advisers also recommend looking beyond traditional bank FDs to options such as corporate fixed deposits, debt mutual funds and government securities. While these avenues may offer better returns, investors should evaluate them carefully based on their goals, risk tolerance and investment horizon to ensure a good fit.