FD Interest Rates: There is relief news for investors who have been struggling with low interest on fixed deposits for the past four years. The decision to hike the policy rate was announced on Wednesday, October 7, after a three-day meeting of the Reserve Bank’s Monetary Policy Committee (MPC). The Central Bank has increased the repo rate from 5.25 percent to 5.50 percent. This is the first time since February 2023 that the Reserve Bank has increased the repo rate. Prior to this, there was a trend of steady rate decline or stagnation.

Inflationary risks continued to rise due to geopolitical tensions across the world, high crude oil prices and tightening decisions by the US Federal Reserve. In India too, the rate of retail inflation was recorded at 4.84 percent in the month of August. Although the figure was within the Reserve Bank’s limit of 6 per cent, an upward trend was clearly visible. To curb this inflation, the central bank has taken the step of increasing the rates by 0.25 percent.

Pressure is mounting on banks to increase FD rates

Shortly after the RBI’s announcement, non-banking finance company Bajaj Finance has hiked its fixed deposit rate by 0.40 percent. Experts believe that now government and private banks will also change their FD rates soon. According to Bankbazaar CEO Adil Shetty, new deposits will be the first to benefit from the increased rate. Along with this, customers will also have to look at how this change affects their loans and deposits.

The pressure on banks to raise interest rates is not just because of the repo rate, but also the math behind it. According to the data of October 2, 2026, the credit-deposit ratio of banks stood at 80.83 percent. A total of Rs. 27.62 lakh crore against deposits with banks of Rs. 22.33 lakh crore was the loan. When banks disburse more loans and the pace of deposits is slower, they have to pay better interest on FDs to raise new capital. Apart from this, Post Office Senior Citizen Savings Scheme and Sukanya Samriddhi Yojana have a fixed interest rate of up to 8.2 per cent. While the yield on government bonds (G-Sec) is in the range of 6.79 percent to 7.22 percent. In such a situation, banks have to make FD rates attractive to attract investors.

At what time and over what period will the benefits increase further?

Raj Khosla, founder of MyMoneyMantra, says there is no government rule for banks to increase interest rates immediately. Banks usually change their rates within 4 to 6 weeks of RBI’s policy change within a few days. This entirely depends on the banks’ operational status and cash requirement.

However, will banks increase interest on long-term FDs as well? Anand Rathi, co-founder of Meera Money, believes that banks cannot raise rates on long-term deposits too much. Banks feel that the current inflationary pressure is only short term. Therefore, banks want to avoid incurring expensive interest for long periods of time. Banks can initially increase the interest rate on new FDs of short or medium tenure only. Currently, small finance banks are offering interest ranging from 7.10 percent to 8.10 percent, while large government banks are offering interest around 6.45 to 6.60 percent and private banks around 6.30 to 7 percent.

What is the right plan for investors?

Those whose FD is already running need not worry. They will continue to earn interest on their deposited capital at a pre-determined rate. But this time is quite favorable for new investment or renewal. Experts say that in such times investors should adopt the ‘laddering’ method.

Laddering means that you should not tie up all your money in one big FD. Instead, divide your total amount into smaller chunks and invest it in FDs maturing at different times. Also, some of your FDs will be replenished at regular intervals. When it matures, you will be able to reinvest that money at the increased interest rates of that time. Also, in case of any emergency, you will have an amount of money available. In this way, investors can consistently earn good profits even amid fluctuating interest rates.