Fixed deposit (FD) investors, who’ve been riding high on attractive returns for the past couple of years, are starting to feel a shift in the wind. Several banks have trimmed FD interest rates, and this could just be the beginning of a broader trend.
India’s largest private lender, HDFC Bank, kicked off the new financial year by cutting rates on select fixed deposit tenures (below ₹3 crore), with the revised interest coming into effect from April 1, 2025.
The bank slashed rates by 35 basis points for 35-month FDs and by 40 basis points for 55-month FDs. Both now fetch 7% interest, down from the 7.35% and 7.40% earlier offered under a special scheme launched in July 2024. Senior citizens will continue to earn 0.5% more on these deposits.
If you're wondering where HDFC Bank’s highest rate now stands — it's at 7.25%, offered for FDs up to 21 months. Longer tenures, surprisingly, fetch lower returns at 7%.
State Bank of India has ended its special deposit scheme, Amrit Kalash, which had been offering a 7.10% return for a 400-day tenure. Introduced in April 2023, the scheme officially closed on March 31.
This move adds to the growing signs that banks are preparing for a lower interest rate environment in 2025.
Yes Bank has also joined the rate-reduction bandwagon, trimming its FD interest by 0.25% on select tenures. Deposits between 12 and 24 months now offer 7.75%, down from 8%.
Bandhan Bank, meanwhile, revised rates for bulk deposits over ₹3 crore from April 3, 2025. Callable deposits (which can be withdrawn before maturity) for tenures of 12 months to under 13 months now offer 8%. Non-callable deposits for the same tenure can earn up to 8.3%.
Much of this rate-cutting seems linked to the Reserve Bank of India’s February 2025 decision to cut the repo rate by 0.25% — the first such move in nearly five years. With the next monetary policy committee (MPC) meeting scheduled between April 7 and April 9, many economists expect another cut.
Market chatter suggests that repo rate cuts could continue through the year, possibly by as much as 100 basis points in total. The reasoning? Global trade pressures, easing inflation, and a need to support economic growth.
Punjab & Sind Bank, too, has made a few changes. Effective April 1, 2025, the bank has reduced interest rates on several special FDs and discontinued its 333-day and 555-day tenures, which were offering 7.72% and 7.45% respectively.
The 444-day FD now offers 7.10%, a 20-basis point cut. For 777 days, the rate has dropped sharply from 7.25% to 6.50%. On a 999-day term, the bank has trimmed the rate by 30 basis points, from 6.65% to 6.35%. The revised rates will be in place until June 30, 2025.
With the direction of rates starting to shift, many depositors are wondering — is this the right time to lock in fixed deposit rates?
No one can say for sure, but signs suggest that this could be the beginning of a broader softening cycle. If RBI goes ahead with another repo rate cut, banks may follow with further reductions in deposit rates.
For investors who rely on fixed income from FDs, this might be a good window to book longer-term deposits while the rates are still relatively attractive.
Then again, if you’re hoping for rates to inch back up — maybe wait and watch. But don’t be surprised if they keep heading south instead.