RBI Cuts Repo Rate: The Reserve Bank of India (RBI) cut the repo rate by 25 basis points on Friday, December 5, 2025, bringing it down to 5.25%. The decision came after a three-day meeting of the Monetary Policy Committee (MPC), which voted unanimously for the cut while keeping the policy stance neutral.
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Along with the repo rate, the standing deposit facility (SDF) rate has been revised to 5%, while the marginal standing facility (MSF) rate and the Bank Rate now stand at 5.50%.
FD INVESTORS MAY SEE LOWER RATES SOON
Many banks had already reduced their fixed deposit (FD) rates by October, and the transmission of earlier cuts is still not complete. With this fresh reduction, banks and small finance banks (SFBs) are expected to trim FD rates again.
However, the change will not be immediate, and it may vary from bank to bank. Some may adjust rates within days, while others may take months.
“From depositors’ standpoint, a 25bps cut in repo rate will create concerns about declining returns on fixed deposits and other interest-bearing savings,” said Ankur Jalan, CEO of Golden Growth Fund (GGF).
Existing FDs will not be affected. But new investors may receive lower maturity amounts if banks revise their rates soon. This makes it important for savers to lock in higher rates while they are still available.
WHY BANKS ARE LIKELY TO CUT RATES FURTHER
Banks generally reduce FD rates after repo rate cuts because their overall cost of funds eventually falls. But the reduction is not always equal to the RBI cut. A 25 bps cut doesn’t mean banks will reduce FD rates by the same margin.
Jalan added, “Banks will likely trim deposit rates in the coming months, making it harder for savers to earn meaningful returns.”
He also noted that lower interest rates encourage wealthy investors and family offices to shift towards alternative products.
SHIFT TOWARDS OTHER INVESTMENT OPTIONS
As deposit returns fall, investors looking for higher yields may move towards alternative assets.
“Affluent investors and family offices often redirect capital toward higher-return products such as real estate-focused Category II AIFs (Alternative Investment Funds) to preserve real yields,” Jalan explained. He said this improves fundraising for such funds and lowers the cost of capital for developers. This can strengthen project viability and expand opportunities in the AIF space.
WHAT FD INVESTORS SHOULD DO NOW
With more banks expected to revise their FD rates soon, investors may benefit from booking deposits at current higher rates. Since the impact of the latest cut may take some time to reflect, there is still a window for savers to act.
For now, FDs remain safe and stable, but locking them early could help investors secure better returns before the next wave of rate cuts.
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