FD rate: Equitas SFB slashes rates, Bank of Baroda floats new scheme ahead of RBI MPC meet

Various banks and non-banking financial institutions have recently lowered their fixed-deposit (FD) rates. Individuals such as conservative investors and retirees, who heavily depend on FDs, must reevaluate their tactics in a decreasing rate climate.

Equitas Small Finance Bank (SFB) has announced revisions to its fixed deposit (FD) interest rates, effective from 7th April 2025, for deposits less than Rs 3 crore. This move aligns with recent adjustments by several financial institutions in response to an anticipated cut in the Reserve Bank of India's (RBI) repo rate, expected later this month. Previously, Equitas SFB offered rates ranging from 3.5% to 8.25% for general citizens and 4% to 9% for senior citizens, depending on the tenure of the deposit. The revised rates see a notable change, with the highest rate now pegged at 8.05% for a specific tenure of 888 days.

However, Bank of Baroda has introduced the 'bob Square Drive Deposit Scheme', effective from 7th April 2025, while discontinuing its Utsav Deposit Scheme. The new scheme offers flexible interest rates for deposits under Rs 3 crore, reflecting the bank’s strategy to adapt to shifting market conditions. These changes are part of a broader trend where banks are recalibrating their offerings in anticipation of further rate cuts by the RBI. This environment necessitates that conservative investors and retirees, who rely heavily on FDs for stable income, revise their investment strategies to maximise returns amidst declining rates.

Equitas SFB’s revised rates vary based on deposit tenure, with short-term deposits yielding lower returns and longer-term ones offering higher rates. For example, deposits from 63 to 90 days now yield a 5.5% interest, while those from 91 to 180 days offer 6%. Longer-term deposits, such as those maturing in 888 days, provide the highest interest rate of 8.05%, an attractive proposition for those looking to secure higher returns in a declining rate environment.

FDs in volatile market

Fixed deposits remain a popular choice for investors seeking low-risk, stable returns, especially as equity markets continue to exhibit volatility. The potential for another RBI rate cut makes it advantageous for investors to lock in current FD rates.

The allure of FDs stems from their ability to offer fixed interest rates over specified periods, shielding investors from the unpredictability of equity markets. The decline in Consumer Price Index (CPI) inflation to 3.61% in February 2025 is a signal that supports the likelihood of further repo rate cuts. By hedging against market fluctuations, FDs provide an assured return, thereby allowing individuals to plan financial goals with certainty. Such predictability is particularly valuable when other asset classes exhibit volatility due to global economic challenges, including geopolitical tensions and market shocks. 

 Given the current economic setting, where geopolitical events like the U.S. President's reciprocal tariffs affecting "all countries" and other global tensions persist, maintaining liquidity while securing returns is advantageous. 

For short-term financial objectives or emergency funds, FDs are especially beneficial. They offer a relatively secure investment avenue for individuals saving for near-term expenses or maintaining an accessible cash reserve for unforeseen circumstances.

Strategies like FD laddering, which involves distributing investments across various maturity periods, are particularly effective in optimising returns while ensuring liquidity. Such strategies allow investors to mitigate risks associated with rate fluctuations and maintain access to funds without penalties.