Interest rates on fixed deposits are starting to fall following the Reserve Bank of India (RBI) cutting the repo rate by 25 basis points, though it is only a few private sector banks who have responded at this early stage.

With the RBI assuring of liquidity surplus of around 1% of deposits, more banks may be encouraged to lower interest rates. There is also the anticipation that the interest-rate cut cycle will elongate for a few more quarters, with the RBI Governor Sanjay Malhotra stating that there is more to worry about growth than inflation due to the global tariff war.  

However, an immediate widespread fall in interest rates among private banks on new deposits has not occurred yet because lenders are engaged in stiff competition amongst themselves to garner more deposits, which are hard to come by to keep in line with the strong loan growth. But the market dynamics will eventually bring them to the lower deposit rate table. 

Among the state-owned banks, State Bank of India (SBI), Punjab National Bank (PNB), Canara Bank and Bank of India have lowered fixed deposit (FD) interest rates on select tenures on balances less than Rs 3 crore. The others who have stepped in are Kotak Mahindra Bank, Yes Bank and a couple of small finance banks such as  Equitas and Shivalik Small Finance Bank.

SBI, the country’s largest lender, has decided to cut rates by 10 basis points for deposits below Rs 3 crore and maturing between one year and less than three years, effective 15 April.

Deposits of tenure between one year to less than two years will now earn an interest rate of 6.7% compared to 6.8% earlier. For deposits with two years to less than three years maturity, the revised rate will be 6.9% versus 7% earlier.

SBI recently ended its special deposit scheme, ‘Amrit Kalash,’ which offered an interest rate of 7.10% for a 400-day tenure. The scheme ran between April 2023 and 31 March 2025.

The Delhi-headquartered lender has revised rates across multiple tenures. For the 300-day tenure, the interest rate has been dropped to 6.50% from 7.05%. The 303-day tenure offers 6.40% interest, down from 7% earlier. For deposits with a tenure of more than 2 years and up to 3 years, the interest rate has been brought down to 6.75% from 7%.

The other tenures which have seen a cut are: 1,204 days revised to 6.15% (from 6.40%);  1,205 days to 5 years revised to 6.25% (from 6.50%); more than 5 years up to 1,894, now earn 6% (from 6.50%); and 1,896 days up to 10 years, now earn 6% (from 6.50%).

Canara Bank has also dropped FD rates by up to 20 basis points on certain tenures for deposits below Rs 3 crore. Effective 10 April, the state-owned lender now offers interest rates between 4% and 7.25% for the general public, and between 4% and 7.75% for senior citizens on callable deposits. 

For term deposits maturing between 180 and 269 days, the bank has decreased the FD interest rate to 6.15% from 6.25%.

Deposits maturing in 444 days will now attract a 7.25% interest rate. 

"Additional interest of 0.50% for senior citizens is available for deposits (other than NRO/NRE and CGA Deposits) less than Rs 3 crore and with the tenor of 180 days and above," Canara Bank said.

Bank of India is reducing interest rates on its short- and medium-term FDs for various maturities, effective 15 April. 

For one-year deposits, customers can earn interest rate of 7.05% compared to 6.8% earlier. For deposits above one year and up to two years, the rate would be 6.75% (6.8% earlier).

For deposits maturing between 91 days and 179 days, the bank will  offer 4.25% (from 4.5% earlier)  and 5.75% (6%) for 180 days to less than one year.

On the day the RBI made the announcement, Kotak Mahindra Bank lowered its FD rates by 15 basis points for specific tenures.

The new rates range from 2.75% to 7.30% for general citizens and from 3.25% to 7.80% for senior citizens. 

For the 390-day tenure deposits, the private lender offers an interest rate of 7.25%, down 15 basis points from 7.40%. 

For tenures between 391 days and 23 months, the rates have dropped 10 basis points to 7.30% from 7.40%. 

For premature withdrawals on deposits greater than or equal to 365 days, Kotak Bank will impose a penalty of 1%. 

Canara Bank will charge a 1% penalty for premature closure or partial withdrawal of domestic or NRO term deposits below Rs 3 crore.

After lowering interest rates for FDs below Rs 3 crore, Equitas Small Finance Bank offers returns between 3.50% and 8.05% for general citizens on annualised yield.

Shivalik Small Finance Bank’s revised interest rates, effective 9 April, range from 3.50% to 8.30% per annum on FDs for general citizens and from 4% to 8.80% for senior citizens. 

On 9 April, the RBI-led monetary policy committee (MPC) reduced repo rate by 25 basis points for the second time in a row, bringing it down to 6% from 6.25%. 

Even a few days ahead of RBI’s monetary policy, a few banks and non-banking financial companies (NBFCs) had begun lowering deposit rates on expectation that the RBI would cut repo rate again. HDFC Bank, Yes Bank and Bandhan Bank, as well as NBFC Bajaj Finance, reduced deposit rates ahead of the policy. 

HDFC Bank did not extend its special deposit scheme, under which it offered 7.35% for 35-month retail deposits and 7.40% on 55-month deposits. It is now offering 7% on these two tenures. The highest interest rate it offers is 7.25% on tenure of 10 months to less than 21 months.

Yes Bank lowered fixed deposit rates by 0.25 percentage point on select tenures. The lender is offering the maximum interest rate of 7.75% for the general public and 8.25% for senior citizens on their term deposits on a tenure bucket of 12 to 24 months. 

Bandhan Bank reduced the savings deposit rate, offering 3-5% depending on the balances between Rs 1 lakh and Rs 10 lakh. Earlier, the interest on the savings account balance was flat at 6% a year.

Bajaj Finance reduced the rate on its longer tenure FDs by a quarter percentage point. From April 10, it is offering 8.15% on a 42-month fixed deposit.