Key Highlights 

• RBI’s 50 bps repo rate cut leads to a sharp decline in fixed deposit interest rates.
• FD investors face reduced returns; experts suggest exploring alternative investment strategies to counter falling rates.

The Reserve Bank of India (RBI) cut its repo rate by 50 basis points to 5.5% on Friday, June 6, in its third monetary policy review for the fiscal year 2025-26. This is the Monetary Policy Committee's (MPC) third consecutive cut this year.

The move is expected to lower borrowing costs, but fixed deposit (FD) investors may not be pleased. Banks have already begun to lower deposit interest rates, following the central bank's previous rate cuts.

"A 50-bp repo rate cut may not immediately lower FD rates, but it does signal the start of a downward trend. Banks are likely to begin lowering deposit rates, particularly for short and medium-term periods. If you've been waiting to lock in current rates, which are still hovering around 7.5%, now could be the time. Senior citizens, who benefit from an additional 25 to 50 basis points, should consider extending their tenures," says Shetty.

Also Read: MPC Cuts Repo Rate by 50 bps to 5.5%, Signals Neutral Stance in RBI Policy

Chintan Panchmatya, Founder of Switch My Loan, stated, "We anticipate a potential surge in demand for big-ticket purchases—cars, personal gadgets, and homes—driven by lower EMIs." The Consumer Durable, Auto, Personal Loan, and Home Loan categories are expected to grow significantly this quarter. We also anticipate an increase in loan balance transfers as borrowers seek to take advantage of lower interest rates."