The State Bank of India (SBI), the country’s largest public sector lender, has delivered a blow to its depositors by reducing interest rates on Fixed Deposits (FDs) and Recurring Deposits (RDs). The move, while not unexpected, is likely to impact millions of customers who rely on FDs and RDs for secure returns on their savings.
This development comes on the heels of a series of repo rate cuts by the Reserve Bank of India (RBI). In 2024, the central bank maintained the repo rate unchanged for four consecutive years. However, in 2025, the RBI has changed its stance significantly — cutting rates not once, but three times already this year.
The first reduction came in February 2025, with a modest 25 basis points (bps) cut. Another 25 bps cut followed in April. But the most significant move happened in June, when the RBI slashed the repo rate by 50 bps, bringing it down to 5.5%.
This aggressive monetary easing was aimed at stimulating economic growth amid slowing demand and subdued inflation. However, for those who park their money in fixed-income instruments like FDs and RDs, it signaled an inevitable outcome — lower returns.
Following the RBI’s lead, SBI has now officially revised its deposit rates, reducing interest payouts on both FDs and RDs across multiple tenures. While the exact percentage cut varies depending on the duration and type of deposit, the overall trend is downward — especially on short- and medium-term deposits.
Here’s what you need to know:
Senior citizens, who often rely on FDs for regular income, may feel the pinch the most.
Customers who planned to renew maturing deposits might receive significantly lower interest rates.
New investors may start considering alternative investment options like mutual funds or government bonds in search of better yields.
Interest rate cuts may seem like a technical banking adjustment, but they have real-world consequences for ordinary savers. Let’s break down how it could impact you:
Lower Returns on Deposits – If you’ve recently opened an FD or RD account, or plan to do so soon, the returns will likely be less attractive than before.
Rethink Long-Term Saving Strategy – With deposit rates falling, customers may need to reassess their savings plans and explore more dynamic investment avenues.
Impact on Monthly Budgets – For pensioners and fixed-income individuals, the cut in returns may disrupt monthly cash flow and financial planning.
Financial experts believe that if inflation remains under control and global economic conditions stay favorable, the RBI may continue on this rate-cutting path, which could result in further downward revision of deposit interest rates in coming quarters.
For depositors, the best strategy might be to lock in higher rates now with longer-tenure deposits if available, or to diversify savings by allocating a portion of funds into other safe, moderate-return financial instruments.
SBI’s move is part of a larger shift in India’s economic environment. As the RBI focuses on promoting growth through cheaper credit, banks like SBI are forced to adjust deposit rates to maintain profitability. While this benefits borrowers due to lower loan interest rates, it’s a tough break for conservative savers.
If you have existing FDs or are planning new ones, this is the time to review your options. Understanding where to put your money for stable yet competitive returns is now more important than ever in this low-interest climate.
