Last Chance to Lock in High FD Rates as Banks Prepare for Interest Rate Cuts
Hurry! Last Chance to Secure High FD Interest Rates Before Banks Cut Returns
The Reserve Bank of India (RBI) recently reduced the repo rate by 50 basis points, initiating a rate cut cycle. This move is expected to lead banks to lower their fixed deposit (FD) interest rates soon. For those looking to secure higher returns on their savings, this could be the last opportunity to lock in favorable FD rates.
Let’s take a look at the latest FD interest rates offered by top banks in India before potential reductions take effect.
Latest Fixed Deposit Interest Rates (as of January 2025)
| Bank Name | 2-Year FD Rate | 3-Year FD Rate | Senior Citizen Benefits |
|---|---|---|---|
| HDFC Bank | 7.00% | 7.00% | Additional 50 bps |
| ICICI Bank | 7.25% | 7.00% | Additional 50 bps |
| Kotak Mahindra Bank | 7.15% | 7.65% | Additional 50-60 bps |
| Punjab National Bank | 6.80% | 7.00% | Additional 50 bps |
| Bank of Baroda | 7.00% | 7.15% | Additional 50 bps |
| Union Bank of India | 6.60% | 6.70% | Additional 50 bps |
| Federal Bank | 7.15% | 7.10% | Additional 50 bps |
(Source: Bank Websites)
Should You Invest in Fixed Deposits Now?
With the repo rate cut, banks are likely to revise their FD rates downward in the coming weeks. Locking in your savings now could ensure a better return before these reductions take place.
However, financial experts caution against investing too much in FDs. Preeti Zende, a SEBI-registered investment advisor and founder of Apna Dhan Financial Services, advises, “Just because current FD rates are lucrative, do not get tempted to lock a major chunk of your money. They are taxable and, in the long run, fail to generate inflation-hedged returns. So, one should take a proper call as per the required asset allocation of their financial goals.”
Tax Implications of Fixed Deposits
It is essential to remember that FD interest income is taxable under the Income Tax Act. The interest earned is added to your total income and taxed as per your applicable slab. Additionally, banks deduct TDS (Tax Deducted at Source) if the interest earned exceeds ₹40,000 in a financial year (₹50,000 for senior citizens).
Final Thoughts
If you have short-term savings goals and prefer a safe investment, now may be the ideal time to book your FD at higher rates. However, for long-term wealth creation, alternative options like mutual funds, PPF, or stocks might offer better inflation-adjusted returns. Before making a decision, consult a financial expert to align your investments with your financial goals.
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