India’s private sector banks cuts FD rates following the Reserve Bank of India’s (RBI) latest repo rate cut. This development is set to affect millions of depositors, especially those relying on fixed deposits for stable and predictable returns.
Why Are Private Banks Cutting FD Rates?
The RBI’s decision to reduce the repo rate by 50 basis points in June 2025 was aimed at boosting economic growth by making borrowing cheaper for businesses and individuals. When the central bank lowers this key rate, it becomes less expensive for banks to borrow money. As a result, banks often pass on the benefit by reducing the interest rates they offer on fixed deposits. This helps them maintain a balance between what they pay to depositors and what they earn from lending.
List of Major Private Banks That Have Reduced FD Rates
After the RBI’s repo rate cut, several major private sector banks in India have revised their fixed deposit (FD) interest rates downward. This move is aimed at aligning with the new lower cost of funds and reflects the banks’ response to changing economic conditions. For millions of Indian savers, especially those who depend on FDs for predictable returns, these changes are significant. The revised rates vary by tenure and customer category (general vs. senior citizen), but the overall trend is a reduction across most popular FD slabs.
“Below is a table summarizing the latest FD rates for key private sector banks, showing the highest rates currently available for both general and senior citizen customers.”
|
Bank |
Highest FD Rate (General) |
Highest FD Rate (Senior Citizen) |
Tenure for Highest Rate |
Effective From |
|---|---|---|---|---|
|
HDFC Bank |
6.60% |
7.10% |
15 to <21 months |
June 10, 2025 |
|
ICICI Bank |
6.60% |
7.10% |
2 years 1 day to 10 years |
June 10, 2025 |
|
Kotak Mahindra Bank |
6.60% |
7.10% |
391 days to <23 months |
June 9, 2025 |
|
Canara Bank |
6.60% |
7.10% |
444 days |
June 9, 2025 |
|
Indian Bank |
6.60% |
7.10% |
1 to 2 years |
June 10, 2025 |
These new rates are applicable for deposits below ₹3 crore. The highest rates are generally offered for medium-term tenures, typically between one and two years. Senior citizens continue to receive an additional interest rate benefit over general customers. As banks adjust to the new monetary policy environment, savers are encouraged to compare rates across banks and consider their options carefully before locking in funds for the long term
How Will Lower FD Rates Affect Depositors?
The reduction in FD rates means that both new and renewing depositors will now earn less interest on their savings. For example, a one-year FD of ten lakh rupees that previously earned 7.35 percent will now earn only 6.60 percent, reducing the annual interest payout from seventy-three thousand five hundred rupees to sixty-six thousand rupees. This change is particularly significant for senior citizens and retirees who depend on fixed deposits for their monthly income. While the tax treatment of FD interest remains unchanged, the lower rates mean post-tax returns are also affected.
What Should Savers and Investors Do Now?
In this changing landscape, it is important for savers to review their options carefully. Start by comparing FD rates across different banks, as some institutions may still offer special schemes or higher rates for specific tenures. For example, IDFC First Bank’s 444-day FD and Canara Bank’s similar tenure provide slightly better returns than standard offerings. Consider spreading your investments across multiple FDs with different maturity periods, a strategy known as laddering, which can help you manage future interest rate changes more effectively.
Exploring alternatives to traditional FDs can also be beneficial. Government-backed schemes like the Senior Citizen Savings Scheme currently offer higher returns at 8.2 percent per annum. High-quality debt mutual funds and AAA-rated corporate FDs are other options that may provide better yields, though they come with their own set of risks and conditions. Diversifying your portfolio can help you achieve better inflation-adjusted returns over time.
What Does the Future Hold for FD Rates?
With inflation currently at 3.16 percent and the RBI signaling a cautious approach to further rate cuts, FD rates may remain stable for the next few months. However, if the central bank continues to ease monetary policy to support growth, further reductions in deposit rates are possible. Experts recommend locking in the best available FD rates now if you have a low risk appetite, while also considering a mix of other investment options for long-term growth.
Conclusion
The recent reduction in FD rates by leading private sector banks is a direct response to the RBI’s efforts to stimulate the economy. While this presents a challenge for traditional savers, staying informed, comparing rates, and diversifying your investments can help you protect and grow your wealth in the current environment.
Disclaimer:
This article is for informational purposes only. Please consult a certified financial advisor before making any investment decisions. Rates and policies are subject to change based on market conditions.