The repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks, impacting liquidity and inflation. In 2025, the repo rate remains a key monetary policy tool to regulate borrowing costs, control inflation, and maintain economic stability by influencing bank lending rates.
Bajaj Finance offers attractive Fixed Deposit interest rates of up to 7.40% p.a. for non-senior citizens, and up to 7.95% p.a. for senior citizens, inclusive of an additional rate benefit of up to 0.55% p.a.
The Reserve Bank of India (RBI) regulates inflation in the country by managing the repo rate. Inflation is driven by the supply and demand chain in the economy. Higher inflation means a higher demand compared to the supply, leading to an increase in prices. To curb that demand the RBI then increases the repo rate making it more expensive for banks to borrow from the RBI.
The correlation between fixed deposit interest rates and the repo rate is straightforward. When the repo rate increases, FD interest rates follow suit, and when the repo rate decreases, FD interest rates decline as well. This connection is clear-cut.
If you have surplus funds for investment, the current period presents a favorable opportunity. As the repo rate rises, both banks and Non-Banking Financial Companies (NBFCs) typically enhance the interest rates offered on fixed deposits. Therefore, considering shorter-term fixed deposits now could be a wise move to capitalize on the anticipated rise in interest rates in the upcoming months.
During the pandemic, the aim was to stimulate growth and aid the then-current economic scenario hence a lower repo rate was decided. The low repo rate allowed for an easy flow of liquidity in the economy. However, it forces the investors who prefer such fixed-income instruments to make a smart decision because lower repo rates signify lower interest rates. However, with the steep hike in repo rate, the interest rates on fixed income instruments are likely to rise. Hence, choosing the right fixed-income instrument becomes crucial. Financial avenues like FD might offer even higher returns.
Banks are now adopting the practice of offering a repo-linked interest rate, allowing investors to take advantage of favorable changes in Repo Rates. Ordinarily, a rise in the Repo Rate might result in reduced real returns. However, with a Repo-linked interest rate, the increase in the repo rate is incorporated into an adjusted higher interest rate.
Fixed Deposit annualised rate of interest for customers below the age of 60 is valid for deposit amounts from Rs. 15,000 to Rs. 3 crore (w.e.f 16 May, 2025) exclusively on website and app.
| Tenure in |
months At maturity (p.a.) |
Monthly (p.a.) |
Quarterly (p.a.) |
Half yearly (p.a.) |
Annual (p.a.)
|
|
|---|---|---|---|---|---|
| 12 - 14 | 7.00% | 6.79% | 6.82% | 6.88% | 7.00% |
| 15 - 23 | 7.35% | 7.11% | 7.16% | 7.22% | 7.35% |
| 18 | 7.40% | 7.16% | 7.20% | 7.27% | 7.40% |
| 22 | 7.30% | 7.07% | 7.11% | 7.17% | 7.30% |
| 24 – 60 | 7.25% | 7.02% | 7.06% | 7.12% | 7.25% |
| 33 | 7.20% | 6.97% | 7.01% | 7.08% | 7.20% |
Fixed Deposit annualised rate of interest for senior citizens is valid for deposit amounts from Rs. 15,000 to Rs. 3 crore (w.e.f 16 May, 2025) exclusively on website and app.
| Tenure in |
months At maturity (p.a.) |
Monthly (p.a.) |
Quarterly (p.a.) |
Half yearly (p.a.) |
Annual (p.a.)
|
|
|---|---|---|---|---|---|
| 12 - 14 | 7.55% | 7.30% | 7.35% | 7.41% | 7.55% |
| 15 - 23 | 7.90% | 7.63% | 7.68% | 7.75% | 7.90% |
| 18 | 7.95% | 7.67% | 7.72% | 7.80% | 7.95% |
| 22 | 7.85% | 7.58% | 7.63% | 7.70% | 7.85% |
| 24 - 60 | 7.75% | 7.49% | 7.53% | 7.61% | 7.75% |
| 33 | 7.75% | 7.49% | 7.53% | 7.61% | 7.75% |
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Predicting FD rate changes in 2025 is uncertain and depends on various economic factors and central bank policies.
Deciding to withdraw from your current FD when there's an increase in FD rates should be based on your financial goals and the terms of your existing FD.
The reverse repo rate is the rate at which banks park their excess funds with the Reserve Bank of India, often used as a tool to control liquidity in the market.
The bank rate is the rate at which the Reserve Bank lends money to commercial banks, while the repo rate is the rate at which banks borrow money from the Reserve Bank for the short term, mainly overnight.
The repo rate, set by the RBI, impacts fixed deposit (FD) interest rates. A higher repo rate increases FD returns by attracting deposits, while a lower rate reduces FD interest as borrowing costs for banks decrease.
As of 2025, the Reserve Bank of India (RBI) has set the repo rate at 6.25%. This rate influences borrowing costs, inflation control, and overall economic stability through monetary policy adjustments.
