FD Rate Changes

FD or fixed deposit is one investment wherein your savings can grow continually with absolute safety. This is because the interest rates on FDs remain unaffected by market fluctuations. Thus, you enjoy stable returns throughout the tenor. As such, most Indians rely on this instrument.

The interest rates on fixed deposits vary for each issuer. Banks, NBFCs, and other financial institutions decide their FD rates based on multiple factors. This includes the repo rate by the Reserve Bank of India (RBI). 

Knowing this enables you to understand the trend and make the most of your investment. To learn more about the factors that lead to an FD interest rate increase or decrease, read on.

Are FD Rates Revised Frequently?

FD rates have a great influence on the returns you receive from the instrument. However, any decrease or increase in FD rates has no effect on your returns once the FD is booked. But understanding how FD rates increase and decrease takes place is crucial.

The frequency at which FD rates increase or decrease depends on the repo rate by the RBI. The repo rate, in turn, is affected by the economic situation. Simply put, the FD rates usually see a change whenever there is a change in repo rate. 

However, some FD issuers may not increase fixed deposit rates right away. It may take a few days before this change is reflected in their policy rates. One reason for this could be that an increase in fixed deposit rates increases their interest burden. This ultimately affects their margins. 

Will Fixed Deposit Rates Increase?

To simply answer the question, “Will FD interest rate increase?”, you would need to assess the trend of the repo rate shifts. The Reserve Bank and the Union Government, have the mandate to protect and boost our country’s economy. 

Thus, RBI becomes the prime force directing the nation's monetary policy. After a thorough assessment of the economy, the Monetary Policy Committee of India (MPC) decides the repo rate.

The repo rate by the RBI acts as a benchmark for banks, NBFCs, and other financial institutions. This is because repo rate is the interest rate at which the RBI lends money to the nation’s financial institutions.

As such, an FD interest rate hike is generally a result of a hike in repo rate.  Simply put, RBI increases repo rates during inflation to absorb liquidity from markets and regulate credit availability. 

In such a scenario, a mild FD rate increase is observed as banks resort to public borrowing. The result is the opposite in the case of a slowdown. During deflation, the RBI decreases repo rate to inject liquidity and increase the availability of credit. 

This begs the question, “Are FD rates going to increase in the near future?” In December 2022, repo rate saw a hike of 35 bps, reaching up to 6.25%. The repo rate is further projected to rise in 2023 by a potential 50 bps due to inflation. Given this, an increase in FD rates is also anticipated.

Factors Which Impact FD Rate Change

Prevalent Liquidity Situation

When adequate liquidity prevails, banks do not usually focus on fixed retail deposits to fulfil their needs. This is contrary to times characterised by tight liquidity, which makes banks turn to their owned deposits. 

Banks may decrease FD rates during periods of high liquidity, while FD rates increase during low liquidity. An example of this is demonetisation, as banks decreased FD rates owing to accounts being flush with liquidity. 

Demand and Supply

Low demand for credit results in a decrease in the interest rates offered by fixed deposits. The opposite applies in the case of high credit demand. This is because a fluctuation in demand affects liquidity needs.

Changes in Lending/Repo Rates

As mentioned above, repo rate is the interest rate at which financial institutions borrow money from the RBI. As such, banks usually decrease or increase the interest rates contemplating a cut or a hike in the repo rate.

What Should You Do in case the Fixed Deposit Rate Changes?

Your response to FD rates increases depends on understanding whether the inflation is set to subside to persist. If there is a chance that inflation will persist, there is a higher possibility that an increase in FD rates is on the horizon. 

Additionally, an increase in FD rates happens for all tenor options. So, if there is a possibility of a further increase in FD interest rates, you should invest in short-term FDs and not rush to invest over the long-term. 

This will allow you to take advantage of the next FD rate hike by allowing you to have liquidity and reinvest your funds. Long-term FDs will earn you more profit once the inflation has subsided.

Another alternative is to ladder your FD investments by dividing into small parts for different tenor durations. This will not only help you earn high returns but also provide enough liquidity windows to meet any financial needs.


The information provided by BFDL herein above is related to the Non-Partnered Banks/ NBFCs and is just for the purpose of information and under no circumstances the information provided hereinabove is intended to be source of advice or recommending any financial investment advice or endorsement of any sort.

The information including interest rates with regard to fixed deposit, provided on this website is gathered through publicly available sources over the internet and is considered as accurate and reliable to the best of our knowledge. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers by the Non-Partnered Banks. The use of information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. You are advised to visit/ contact the respective Banks/ NBFCs to verify the information before making any investment or opening an account. Further, BFDL does not undertake any responsibility or liability to update this information. YOU ARE SOLELY RESPONSIBLE FOR ANY LIABILITY OR DAMAGE YOU INCUR THROUGH ACCESS TO OR USE OF THE SITE OR SUCH INFORMATION OR MATERIALS EXCEPT WHERE THE LAWS AND REGULATIONS OF A PARTICULAR JURISDICTION CONCERNING WARRANTIES CANNOT BE WAIVED. Additionally, display of any trademarks, tradenames, logo and other subject matters of intellectual property owners. Display of such Intellectual Property along with the related product information does not imply BFDL’s partnership with the owner of the Intellectual Property of such products. 

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Will FD rate increase with an increase in the repo rate?

No. It is not mandatory for banks and other financial institutions to revise FD rates with a change in repo rate. 

Should I withdraw from the current FD if there is an increase in FD rates?

The first thing to consider here is whether the penalty for premature withdrawal is lower than your expected return from a new FD with increased rates. After that, you should look at whether the FD rates will continue to increase. 

If yes, then refrain from withdrawing until the frequency of FD rates increases subsides. Alternatively, you can ladder your FDs to make the most of rising FD rates. 

Will FD rates increase in 2023?

With the last repo rate hike in December 2022, economic analysts are anticipating a further hike in 2023. If that happens, it will result in an increase in FD rates.

Which is the safest FD?

Fixed Deposits, in general, offer better safety and security for your investment. However, to assess the issuer’s credibility, you should look at their credit rating.

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