FD Investors Expecting Higher Returns? RBI May Have Other Plans

Key Takeaways

• The RBI MPC is widely expected to hold the repo rate at 5.25% on June 5, despite rising inflation driven by high fuel prices and a weaker rupee. FD investors hoping for a rate hike may have to wait longer.
   
• The RBI had cut the repo rate by a cumulative 125 basis points in 2025. It has since held the rate steady in its last two MPC meetings, that offer FD investors some temporary relief.

RBI MPC June 5: Will Inflation Finally Push FD Rates Higher?

India’s retail inflation is inching up. Fuel costs are elevated, the rupee is under pressure near ₹95 per US dollar, and WPI has climbed to 8.3%. For crores of FD investors, this raises one question: will the RBI finally raise the repo rate?

The short answer, for now, is no. The RBI MPC is widely expected to keep the repo rate unchanged at 5.25% in the June 3 to 5 meeting, while maintaining a neutral policy stance, according to Abhishek Bhilwaria, an AMFI-registered Mutual Fund Distributor. 

That means banks have little reason to raise FD rates immediately. FD investors will have to wait for clearer signals in later meetings.

What This Means for Your FD Returns?

FD investors received a breather when the RBI left the repo rate unchanged at 5.25%. This followed a cumulative 125 basis point easing in 2025. Banks had already cut FD rates sharply through that period. The two consecutive holds gave some banks room to stabilise, or in a few cases, marginally raise rates on select tenures.

But a hold is not a hike. Adhil Shetty, CEO of BankBazaar, noted that while liquidity conditions support deposit mobilisation, materially higher FD rates are unlikely in a steady-rate environment. 

Here are the current FD rates:

Experts Urge FDs Holders to Lock In Now, Not Later

SBI Research stated ahead of the meeting that the RBI has a range of tools to manage currency volatility without raising the benchmark repo rate, and recommended the central bank avoid any immediate rate action. That view is shared widely. 

Gaurav Maheshwari, CFO at Alankit Limited, agreed that the RBI is likely to hold at 5.25%, adding that while domestic fundamentals remain resilient, supply-side cost shocks are pushing retail inflation projections closer to 5%.

Adhil Shetty said the rate trajectory ahead is uncertain, and that depositors are better placed locking in at current levels rather than waiting for rates to stay unchanged. He recommended laddering across multiple tenures to manage reinvestment risk. He also noted that PPF at 7.1% and SCSS at 8.2% offer strong sovereign-backed alternatives to bank FDs.

Conclusion

The June 5 MPC outcome is unlikely to bring the rate hike FD investors were hoping for. The rising inflation may not force the RBI’s hand this time, but the likelihood of a repo rate increase becomes higher in later MPC meetings. For now, the smarter move is to lock into existing FD rates across staggered tenures before further repricing occurs.

FAQs

Will FD rates rise anytime in the near future if the RBI maintains the repo rate at 5.25%?

Most likely not. When the RBI maintain therepo rate at 5.25%, banks are unlikely to increase the FD rates soon. Majority of the experts believe FD rates will remain around 6.75-7.25%. FD rates may increase if inflation remains high leading the central bank to hike the rates further.

Should I wait for higher FD rates after the RBI MPC meet on June 5th?

Many experts advise against waiting for higher FD rates, suggesting that it would be prudent to book FD at the currently offered rates. It is not expected that a rate hike will take place on June 5th MPC meeting and it’unlikely there will be a substantial increase in FD rates. You can park money in FD across multiple maturities to deal with future rate changes.