RBI Repo Rate Cut Impact: SBI, HDFC Bank, Others Slash FD Interest Rates

In a recent move, the Reserve Bank of India lowered the repo rate by 25 basis points to reach 6%. The banks responded quickly, trimming their fixed deposit (FD) interest rates in short order across a range of tenures. The shift is now pretty much where you want it, aimed at liquidity, and looking to stimulate through an accommodative policy stance that makes retail banking products a little less attractive.

SBI, BOI Lead the Rate Reduction

The largest lender in India, the State Bank of India (SBI), has declared a decrease of 10 basis points in FD rates for deposits of under INR 3 crore, effective April 15, 2025. For time deposits of 1-2 years, the interest rate is now 6.70%, down from 6.80%. For fixed deposits with maturities between 2 and 3 years, the interest rate is now 6.90%, decreased from the previous rate of 7.00%. Senior citizens continue to earn 50 bps more under the "SBI We-Care" program, which offers preferential rates for time deposits.

Bank of India (BOI) has done one better and cut FD rates by a further 25 basis points. The rate for 1-2 year deposits, for example, is now at 6.75% (down from 6.80%). For short-term deposits (tenure 91 days to 1 year), the bank has also slashed rates; and it has done away with its high-yielding 400-day scheme that offered a premium of 7.30% before this cut was announced.

Private Banks Adjust Long-Term Rates

The private sector behemoths HDFC Bank and Yes Bank have also followed the trend of cutting rates. HDFC Bank has cut rates for its longer-term deposits by 35 to 40 basis points, which affects deposits that mature in 2 years and 11 months and 4 years and 7 months. Yes Bank has made a uniform cut for FDs that mature between 12 and 24 months. All of this demonstrates the wider industry ripple effect of the central bank cutting rates.

PNB and Canara Bank Fine-Tune Offerings

Other public sector players, such as Punjab National Bank (PNB) and Canara Bank, have also made adjustments to their FD rates. While PNB maintains an offering of up to 7.10% for its 390-day deposit, Canara Bank made some trims to its select suite of rates, with the most notable being a reduction of 20 basis points to some of its terms (not including the 444-day FD). However, the offer with the bank that stands out is still the 444-day FD at 7.25%. This sky-high rate, if you want to call it that, is still a very attractive option for not just long-term savers but also for senior citizens, who are receiving an extra 50 basis points on what is an already elevated rate.

As fixed deposits across the board have seen their rates softening, it is high time that we took a step back and re-evaluated our income strategies. Broadly, our financial advisors have suggested looking more towards short-duration debt funds and even some kind of niche deposit scheme that might be yielding better than the kind of fixed deposits we are used to. The distance we seem to be from the next rate hike entails that our fixed deposit returns might be compressed even further for the kind of time frame we might have considered a "safe" space.