RBI -Repo rate reduced by 50 BPS: What fixed deposit -investors should do now | Mint

The RBI’s 50 BPS rate cut could lead to lower fixed deposits, which investors ask to consider smarter strategies and alternative investment options amid a falling interest rate environment. RBI’s June 2025 -rate cutting sparks concerns among investors with fixed deposits facing falling returns. The Reserve Bank of India lowered the Repo rate by 50 basis points to 5.5% on June 6, 2025. This is the third consecutive cut this year. This step is aimed at stimulating economic growth in the midst of relief inflation, thereby bringing challenges to investors with fixed deposit (FD), as banks are expected to lower the FD interest rate in a response to this step. A amit Bansal, founder, Bharatloan, believes that, “the daring movement of the RBI to reduce the repo rate by 50 bps to 5.5% and reducing the CRR by 100 BPS is a decisive step towards systemic liquidity. He further added that, “combined with the RBI’s revised FY26 inflation forecast of 3.7%, far below its target of 4%, this policy provides a lead on the growing shift, providing space to extend affordable credit to the large salary class of India, especially in a time in which urban demand falls and investment activities.” The impact on fixed deposit returns with a cumulative deduction of 100 basis points in the repo rate in 2025, banks gradually lowered the fixed deposit interest rates. According to the SBI research, fixed deposit tariffs have dropped by 30 to 70 basis points since February 2025. Short and medium -term fixed deposits are likely to be the most serious rate cuts. For example, a fixed deposit of 1 year falling from 7% to 6.5% would result in £ 5,000 less annual interest on a deposit of £ 10 Lakh. Strategies for FD investors amid falling rates in a fast falling interest rate environment, investors with fixed deposits may consider the following methods: Loading FDS: Stumble your investments on different expiry dates to manage reinvestment risks and maintain proper liquidity. Exploration of small savings schemes: Government -sponsored schemes such as senior Citizen scheme or national savings certificates often offer higher yields and are less sensitive to the recovery rate changes. Considering short-term corporate bonds: Supreme 2-3 years of corporate bonds can also help deliver better returns compared to traditional FDs. Evaluation of Hybrid Funds: These funds invest in a mixture of debt and equity. This has the potential to provide higher returns with moderate risk. Inflation trends monitoring: With CPI inflation projected at 3.7% for FY26, real returns of FDS can be minimal, with an emphasis on the need for diversified investment strategies. Investors can also move funds in such a scenario to stock. The recent rate cut of the RBI thus underlines the importance of investors with fixed deposit to reconsider their investment goals and strategies. Since traditional fixed deposits provide safety, their diminishing returns in a low interest rate environment should be needed to investigate alternative investment roads. Diversification of investments and keeping abreast of economic indicators can provide investors to navigate this challenging landscape. Disclaimer: This article is for information purposes only and does not form financial advice. Investors are advised to consult a certified financial advisor before making investment decisions.