Wednesday, Nov 29, 2023

RBI Repo Rate Pause: Impact On FD Rate Outlook And Major Rate Changes in One Month

Outlook Money

RBI Repo Rate Pause: Impact On FD Rate Outlook And Major Rate Changes in One Month

The Reserve Bank of India has maintained the repo rate at its recent monetary policy committee meeting. Here’s a look at the evolving landscape of fixed deposit rates in conjunction with the RBI maintaining its repo rate stance

The Reserve Bank of India (RBI) has maintained the repo rate in its third bi-monthly monetary policy committee (MPC) meeting of the ongoing fiscal year (FY 24), despite an uptick in the country’s inflation during June.

However, there are indications that banks have initiated a trend of lowering deposit rates on fixed deposits (FDs). Also, there are mixed reactions coming in from some small finance banks who are hiking FD interest rates.

Here’s a look at the impact on FD rates and the major rate changes across banks in the recent past.


In the preceding fiscal year, the RBI had implemented a substantial 2.5 per cent increase in repo rate. This measure was aimed at mitigating the impacts of both the Covid-19 pandemic and inflation. Consequently, this led to heightened interest rates on various loans, including those on homes, automobiles, and personal financing. While banks initially raised interest rates on both savings and fixed deposits, there is now a noticeable shift.

Over the last 15 months, bank FD interest rates have consistently witnessed an upward trajectory. But as it seems like a completion of the RBI’s rate hike cycle, the increase in FD rates seems to now have stopped. Three large banks have reduced FD rates in the last one month with Punjab National Bank (PNB) announcing rate dips even before that.

Experts are of the opinion that there remains an opportune window for consumers to secure favourable rates by reinvesting their deposits in the short term to get higher returns.

Sriram Jayaraman, a Sebi-registered investment advisor (RIA), emphasises the importance of maintaining a consistent investment approach regardless of potential future fluctuations in repo rates.
Says Jayaraman: “It is difficult to predict whether the pause is temporary. RBI may increase or decrease the repo rates in future, and it’s impossible to predict this. So, one should continue investing in FD and debt products irrespective of the change in repo rates.”

The recent developments in the FD rates of specific banks further illustrate this dynamic landscape.


On August 11, 2023 after the RBI announced a pause in the repo rate, Axis Bank announced a 15 basis points (bps) increase in interest rates for a 2-year to less than 30-month tenure, rising from 7.05 per cent to 7.20 per cent. The bank’s other higher tenure options continue to provide a rate of interest of 7 per cent.

Incidentally, Axis Bank had on July 17 reduced the fixed deposit interest rate for tenures ranging from 16 months to less than 17 months from 7.10 per cent from 7.20 per cent. This came into effect on July 26.  


IndusInd Bank has decreased the deposit rate by 25 basis points (bps) for the 1 year 7 months to 2-year tenure category, setting it at 7.50 per cent from the previous deposit rate of 7.75 per cent. The change, effective from August 5, 2023, led to the bank to offer interest rates ranging from 3.5 per cent to 7.50 per cent for tenures ranging from 7 days to 10 years.


Bank of India recently announced a decrease of 100 basis points (1 per cent) for its 1-year FD, effectively bringing down the deposit rate from 7 per cent to 6 per cent.  

Additionally, the bank introduced a new FD tenure of 400 days, termed the “Monsoon Deposit”, offering a higher deposit rate. The revised rates came into effect on July 28, 2023.