FD investors alert: Waiting for higher rates may prove futile, warn experts

RBI has kept the repo rate at 5.5% on August 6. FD rates may fall further. Here's what experts suggest depositors should do next

The Reserve Bank of India (RBI) on Wednesday, August 6, decided to maintain the repo rate at 5.5 per cent, offering no relief for fixed deposit (FD) investors. This marks the fourth straight meeting where the Monetary Policy Committee (MPC) has chosen to hold rates, after slashing them thrice earlier this year.

 

Are FD rates going to fall further?

 

Most banks have already trimmed their FD rates in response to previous repo rate cuts. Experts believe that while Wednesday’s status quo may not trigger an immediate reduction, the trend is clear.

 

“For depositors, a 50 bps repo rate cut may not slash FD rates overnight, but it does signal the beginning of a downward trend,” said Adhil Shetty, CEO of BankBazaar.com. “Banks are likely to start trimming deposit rates, especially for short- and medium-term tenures.”

 

 

Jetaish Gupta, Director of Adore Group, added, “While RBI did not change the repo rate of 5.50 per cent, it left FD investors in a strategic bind. This unchanged rate is a signal for a short-term absence of increases in bank deposit interest rates.”

 

Vivek Jain, CBO, Life Insurance at Policybazaar, bluntly said, “Waiting for significantly higher FD rates could prove futile.”

 

Should you lock into FDs now or wait?

 

For those relying on FDs for stable income, deciding when to lock in rates has become tricky.

 

“If you’re a conservative investor looking for safety and predictability, consider locking your money in current long-term FD rates before they dip further. Some banks are still offering between 7 per cent and 7.5 per cent for 2–5-year tenures. Senior citizens get an additional 0.25 per cent to 0.5 per cent,” said Shetty.

 

However, Gupta advised caution. “For people who depend on FDs for regular and safe income, it may not be a good idea to lock in their money for long durations,” he said.

 

Vivek Iyer, Partner at Grant Thornton Bharat, suggested a measured approach. “A one-year FD makes sense, as we don’t expect interest rate hikes for at least the next 12 months. Any changes in the term structure will likely see yields soften further due to external economic pressures,” he said.

 

What is FD laddering and why is everyone recommending it?

 

FD laddering seems to be the buzzword among financial advisors right now. It’s a strategy where you split your investments across multiple FDs with different maturity periods.

 

“Deciding whether to lock in longer term FDs as against waiting for better rates depends on your risk appetite,” said LC Mittal, Director, Motia Builders Group. “A mix of the two—laddering across tenures—would be a healthy solution in this 5.50 per cent repo rate environment where it offers certainty and yet flexibility.”

 

Annuj Goel, Chairman of Goel Ganga Developments, also recommended laddering. “Have a look at your financial portfolio and consider dividing the investments partially between short- and medium-term FDs. This lets you profit if rates rise soon but still keeps gains assured.”

 

Shetty broke it down further. “For instance, if you have ₹10 lakh, you could divide it into five FDs of ₹2 lakh each, maturing in 1 to 5 years. As each matures, you reinvest based on prevailing rates. This balances risk and return.”

 

He, however, also urged investors to keep thier tax slab in mind. Interest from FDs is fully taxable. A 7.5 per cent pre-tax return shrinks to 5.25 per cent post-tax for someone in the 30 per cent bracket. "In such cases, debt mutual funds or tax-free bonds could be considered for better efficiency,” he said.

 

Jain had a simple suggestion for the undecided. “If you’re still unsure, consider parking a portion of your funds in shorter-tenure FDs of 1–2 years. In uncertain cycles, consistency and smart structuring often outperform perfect timing.”

 

Which banks are still offering the best FD rates?

 

Here’s a snapshot of some of the highest FD rates available across small finance banks, private sector banks, and NBFCs as of July 30, 2025, according to PaisaBazaar:

 

Small finance banks

 

Slice Small Finance Bank: 8.50 per cent for 18 months 1 day to 18 months 2 days; 8.25 per cent for 3 years; 7.75 per cent for 5 years

Jana Small Finance Bank: 8.20 per cent for 5 years; 7.75 per cent for 3 years; 7.50 per cent for 1 year

Suryoday Small Finance Bank: 8.40 per cent for 5 years; 8.15 per cent for 3 years; 7.50 per cent for 1 year

Unity Small Finance Bank: 7.75 per cent for 1001 days; 7.25 per cent for 3 and 5 years

Utkarsh Small Finance Bank: 7.65 per cent for 2–3 years; 7.25 per cent for 5 years

Equitas Small Finance Bank: 7.60 per cent for 888 days; 7.25 per cent for 1 and 3 years

ESAF Small Finance Bank: 7.60 per cent for 444 days; 6 per cent for 3 years

Ujjivan Small Finance Bank: 7.60 per cent for 2 years; 7.50 per cent for 1 year

 

Private sector banks

 

Bandhan Bank: 7.40 per cent for 2 to less than 3 years; 7.25 per cent for 1 and 3 years

CSB Bank: 7.40 per cent for 13 months

DCB Bank: 7.40 per cent for 27–28 months; 7 per cent flat for 1, 3, and 5 years

SBM Bank India: 7.60 per cent for 18 months to under 2 years 3 days; 7.50 per cent for 5 years

 

Corporate FDs (NBFCs)

 

Muthoot Capital Services: 8.95 per cent for 3 years; 8.50 per cent for 5 years

Manipal Housing Finance: 8.25 per cent for 1, 2, and 3 years; 7.75 per cent for 5 years

Can Fin Homes: 8 per cent for 3 years; 6.75 per cent for 5 years

 

Senior citizens typically get an additional 0.25 per cent to 0.50 per cent across most banks and NBFCs.