FD rates set to rise? RBI repo decision may bring good news for investors

Could bombs dropping in Israel and Iran affect fixed deposit (FD) interest rates in India? It might seem strange, but the fallout of the Israel-Iran is influencing inflation in India causing prices of oil, energy, fertiliser and essential commodities to climb. If the butterfly effect holds true, then the Israel-Iran conflict will definitely have an impact on FD rates in India, sooner or later. You can catch the first impressions when the Reserve Bank of India (RBI) announces the repo rate after the three-day Monetary Policy Committee (MPC) meeting on Wednesday (April 8, 2026).

Quick recap of repo rate and FD rates

Many banks and small finance banks cut their fixed deposit interest rates when the RBI started reducing the repo rate from the beginning of the previous year. Following cumulative repo rate cuts of 125 bps since January 2025, as a result of the impact of G Sec, inflation and other factors, many banks and SFBs cut FD rates.

The central bank, however, maintained its repo rate at 5.25% in the last two MPC meeting in December 2025 and February 2026, giving banks some breathing space to maintain FD rates, or in some cases, to increase them.


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Iran-Israel conflict and FD rates in India

Due to the Iran-Israel conflict, rising prices of fuel and energy in India are reflecting in the costs of essential items. As a result, inflation will rise. The empirical data of rising inflation will be known when the Labour Bureau releases data for March and subsequent months. But most households have already started feeling the pinch of higher costs.

Rising inflation may not force the RBI to increase the repo rate this time around, but in later MPC meetings, the likelihood of higher repo rate is much higher. Once the central bank increases the repo rate, banks and SFBs may also follow by offering higher FD rates.

RBI repo rate prediction

Adhil Shetty, CEO, Bankbazaar.com, expects a pause in the repo rate.

“The Reserve Bank of India has made significant progress in moderating inflation, but risks, especially from food prices and global uncertainties, continue to persist. Given India’s strong growth momentum, the central bank is likely to remain cautious and prioritise inflation stability over premature rate cuts.”

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RBI repo rate- A brief history

Date	Rate (%)	Change (%)
07-Feb-25	6.25%	-0.25%
09-Apr-25	6.00%	-0.25%
06-Jun-25	5.50%	-0.50%
06-Aug-25	5.50%	0.00%
05-Dec-25	5.25%	0.25%
06-Feb-26	5.25%	0.00%

Vinayak Magotra, product head & founding team, Centricity WealthTech, too expects the RBI to maintain status quo on the repo rate.

“While inflationary pressures are expected to rise in the near term, driven largely by fuel and food, the nature of the shock remains predominantly supply-driven,” says Magotra.

But Magotra says the full impact of the ongoing geopolitical issues, on key Indicators such as inflation and growth is yet to reflect in the data.

“In this context, any policy move at this stage may be premature and risks triggering market volatility,” says Magotra.

Which elements determine FD rates in banks and small banks?

Shetty says FD rates are not solely a function of the repo rate as they are influenced by liquidity conditions, the inflation trajectory, G-Securities yields and competition from small savings schemes.

Magotra says the repo rate impacts FD rates with a lag and not in a one-to-one manner.

“While the repo rate sets the overall direction, FD rates are more directly influenced by factors such as liquidity conditions, credit demand, G-Sec yields, small savings rates, and inflation,” says Magotra.

Highest FD interest rates (public sector banks)

Bank Name	Highest Interest Rate (%)	Tenure
Punjab & Sind Bank	6.75	666 days
Bank of Maharashtra	6.65	400 days
Bank of India	6.6	450 days (Star Swarnim)
Canara Bank	6.6	555 days
Indian Bank	6.6	444 days

Highest FD interest rates (private sector banks)

Bank Name	Highest Interest Rate (%)	Tenure
IDFC FIRST Bank	7.4	390 days
SBM Bank India	7.3	Above 18 months to less than 2 years 3 days
Bandhan Bank	7.25	2 years to less than 5 years
Jammu & Kashmir Bank	7.25	888 days
RBL Bank	7.2	18 months to 3 years

Highest FD interest rates (small finance banks)

Bank Name	Highest Interest Rate (%)	Tenure
Suryoday Small Finance Bank	8.1	30 months
ESAF Small Finance Bank	8	501 days
Jana Small Finance Bank	8	375 to 400 days
Shivalik Small Finance Bank	7.8	21 months 1 day to 22 months
slice Small Finance Bank	7.75	18 months 1 day to 18 months 2 days

What do current indicators suggest about FD rates?

In the current perspective, Shetty says liquidity in the banking system remains relatively tight, with credit growth continuing to outpace deposit growth.
“This dynamic is pushing banks to maintain attractive FD rates,” says Shetty.

Role of G-Sec yield and small savings schemes

Magotra explains that at the same time, relatively elevated G-Sec yields and attractive small savings rates continue to provide pressure on banks and small finance banks.

“As a result, FD rates are likely to remain broadly stable in the near term rather than see any sharp movement,” says Magotra.

10-year G-Sec bond yield jumped from 6.581% on January 1, 2026, to 7.139% on April 3, 2025.

Inflation was also up from 1.33% in December 2025, to 3.21% in February.

Small savings schemes such as Senior Citizens Small Savings Scheme (SCSS) and Sukanya Samriddhi Account (SSA) have been offering 8.2% interest rate each, while National Savings Certificate (7.7%) and Monthly Income Scheme (7.4%) are also offering attractive interest rates.

Small savings scheme interest rates

Scheme	Interest Rate (%)	Tenure / Maturity
Senior Citizen Savings Scheme (SCSS)	8.2	5 years
Sukanya Samriddhi Account (SSA)	8.2	21 years (maximum)
National Savings Certificate (NSC)	7.7	5 years
Kisan Vikas Patra (KVP)	7.5	115 months
Monthly Income Scheme (MIS)	7.4	5 years
Post Office Time Deposit (5-year)	7.5	5 years
Public Provident Fund (PPF)	7.1	15 years

Can FD rates go up after RBI MPC meeting?

Shetty says credit growth continues to outpace deposit growth and keeps a competitive pressure on banks to offer attractive FD rates.

“This should keep rates elevated in the short term, but the scope for further upward movement is limited,” says Shetty.

At the same time, G-Sec yields are stable but elevated, which also supports higher deposit rates, as per Shetty.

“Small savings schemes continue to offer competitive returns, limiting the room for banks to reduce FD rates aggressively. Taken together, these factors indicate that FD rates are likely to remain stable at higher levels in the near future,” says Shetty.

Magotra, however, predicts if FD rates go up, that can impact inflation over the next few quarters and lead to a shift in the RBI’s policy stance.

What should an investor do if FD rates are cut or increased?

Vijay Kuppa, CEO of InCred Money, reveals his strategy in conditions what an FD investor should do if the bank cut or increased fixed deposit rates.

When FD rates fall

• Conservative investors should ladder FDs and prioritise capital protection
• Moderate investors may add equities and short-duration bonds
• Aggressive investors can increase equity exposure and continue SIPs.
• If FD rates fall, Prabhakar Kulkarni, head, BFSI Advisory, NPV & Associates, advises FD investors to avoid panic withdrawals and risky investments in unregulated schemes. Kulkarni asks them to invest only in credible banks/NBFCs under RBI oversight.

When FD rates rise

Kuppa advises conservative investors to lock in FDs and stagger maturities

• Moderates may allocate more to fixed income
• Aggressive investors can rebalance portfolios while maintaining long-term equity exposure.
• When FD rates rise, Kulkarni advises depositors to verify bank credibility and performance before investing in an FD.