Updated 5 December 2025 at 17:34 IST
RBI Slashes Repo Rate To 5.25%: How Will It Impact Your FDs And Loans?
In just 11 months, the repo rate has fallen a sharp 125 bps from 6.50% at the start of the year. Whenever the RBI cuts the repo rate, banks eventually follow by trimming fixed deposit (FD) rates. Most lenders had already lowered FD rates between July and October after the earlier cuts.
- Republic Business
- 2 min read
On December 5, 2025, the Reserve Bank of India (RBI) delivered a 25 basis points (bps) repo rate cut, bringing it down from 5.50% to 5.25%. This is the fourth rate cut in 2025, following 25 bps each in February and April, a bigger 50 bps in June and no change in August and October.
In just 11 months, the repo rate has fallen a sharp 125 bps from 6.50% at the start of the year.
Whenever the RBI cuts the repo rate, banks eventually follow by trimming fixed deposit (FD) rates. Most lenders had already lowered FD rates between July and October after the earlier cuts.
With this fresh reduction, another round of downward revisions is almost certain in the coming weeks and months.
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Why Banks Cut FD Rates After Repo Rate Reduction
The repo rate is the interest rate at which banks borrow short-term funds from the RBI. When it falls, the overall cost of money in the system comes down. To maintain healthy margins, banks gradually reduce the interest they pay on deposits, including fixed deposits.
The drop is rarely 1:1, according to experts. A 25 bps repo cut may lead to only a 10-20 bps drop in FD rates and the timing varies from bank to bank. Some public-sector banks move slowly, while small finance banks and private lenders often adjust faster.
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Existing FDs Are Safe - New Ones Will Earn Less
The good news is that if you already have an FD running, nothing changes. Your booked rate stays locked till maturity.
But anyone opening a new FD from next week onwards will most likely get a lower interest rate than what is available today. Even a small 0.25% drop over 5-7 years can reduce your final payout by thousands of rupees.
See the Real Impact with Simple Examples
Let’s assume you book a 5-year tax-saver FD today at 6.80% (a rate still offered by several banks as of December 5, 2025). If banks cut rates by just 0.25% to 6.55% after this repo cut, here’s how much less the investor will earn:
| FD Amount | Maturity at 6.80% (current) | Maturity at 6.55% (after cut) | Loss in maturity amount |
|---|---|---|---|
| Rs 3,00,000 | Rs 4,21,250 | Rs 4,15,980 | Rs 5,270 |
| Rs 7,00,000 | Rs 9,82,250 | Rs 9,70,600 | Rs 12,290 |
| Rs 12,00,000 | Rs 16,84,000 | Rs 16,63,680 | Rs 21,320 |
| Rs 18,00,000 | Rs 25,26,000 | Rs 24,95,520 | Rs 31,980 |
(Calculations done using compound interest annually)
Even a seemingly small 25 bps reduction eats away Rs 21,000-Rs 32,000 on mid-to-large deposits over five years.
Published By : Tuhin Patel
Published On: 5 December 2025 at 17:34 IST