No Change In Repo Rate: How Will It Impact Your FD Interest Rates? Find Out

RBI Repo Rate Cut: The Reserve Bank of India Governor Sanjay Malhotra on Wednesday, October 1, announced to keep the repo rate cut unchanged at 5.5%. The announcement, combined with a slew of banking reforms, is likely to impact the fixed-income investors' strategy.

RBI repo rate cut is directly proportional to returns on fixed deposits, one of the most popular instruments of fixed income investors. The RBI has kept repo rate unchanged in October, but Governor Sanjay Malhotra, has mentioned that the RBI may opt for another rate cut considering the macroeconomic situation.

RBI Repo Rate Decision: How It Will Impact Fixed Income Investors?

The RBI repo rate decision and other announcements related to banking rules and regulations is likely to boost investment in fixed income as well as corporate bonds, according to experts.

"RBI kept interest rates unchanged and continued its neutral policy in light of uncertain domestic and global political and macroeconomic outlook. They lowered expected inflation CPI for FY26 to 2.6% from 3.1% and increased expected growth to 6.8% from 6.5%. The policy essentially opens the door for potential rate cuts in future and described at dovish pause," noted Vishal Goenka, Co-Founder of IndiaBonds.com.

The big reform measures for banking like M&A financing framework and expansion of finance against listed debt securities is likely to broaden the scope for capital markets, according to Goenka. "This will accelerate access to capital markets for acquisition financing as well as investment in fixed income and corporate bonds all across with funding framework in place in the near future," he added.

Low Inflation To Support Investment Avenues

The RBI guidelines and forecast for retail inflation is likely to give a boost to sentiment around savings. "With CPI expectations revised lower but the RBI pausing to observe transmission, deposit and high-quality bond yields are unlikely to fall sharply immediately - banks may still pass earlier cuts gradually. If you have capacity to lock-in reasonable fixed income yields now like Bonds, it remains a prudent option," stated Vijay Kuppa, Director, Bidd.

RBI Repo Rate Impact on FD Rates

As soon as the RBI announces repo rate cut, banks tend to transfer the repo rate cut benefit to borrowers. A repo rate cut leads to reduction in loan rates, whereas, it makes borrowing lesser lucrative for banks. Hence returns on fixed deposits and other instruments fall. According to SBI research report, transmission to deposit rates is expected to be strong in the coming quarters.