Look beyond returns, factor in credit risk and lock-ins

Interest rates in the Indian economy are on a downward trajectory.

- SARBAJEET K SEN

The Reserve Bank of India (RBI) has already reduced the repo rate by 100 basis points this year. It, however, paused rate cuts for a second time last week, providing relief to fixed-income investors. Rates on bank and company fixed deposits (FDs) have fallen since the start of calendar year (CY) 2025.

"One last rate cut of 25 basis points (bps) is possible owing to the downward revision in inflation projections and the RBI governor's statement that this opens up space for further policy action," says Joydeep Sen, corporate trainer (financial markets) and author.

Fixed deposit options

Due to benign inflation, real interest rates (nominal interest rate minus inflation rate) are attractive. For conservative investors in lower income tax brackets, mediumto long-term bank fixed deposits (FDs) remain a safe investment choice. Those willing to take slightly higher credit risk may consider company FDs or small finance bank FDs.