RBI MPC 2025: How Likely June 6 Repo Rate Cut By Sanjay Malhotra-Led MPC Impact FD Rates?

As the Reserve Bank of India's Monetary Policy Committee (MPC) meeting began on Wednesday, experts are predicting another repo rate cut by the RBI MPC this week. RBI repo rate cuts generally impact home loan lending rates and fixed deposit rates.

RBI MPC's second meeting of the financial year 2025-25 (FY26) started on Wednesday, June 4 and will conclude on June 6. Sanjay Malhotra is expected to brief the media about the RBI MPC's repo rate cut announcement on Friday.

RBI MPC: Will There Be Another Repo Rate Cut?

RBI repo rate currently stands at 6% after the central bank announced a 25 bps rate cut in April 2025. There are chances that the RBI will announce another repo rate cut in June. As per a Goodreturns survey of 50 economists, the RBI may go for a 25 basis point rate cut in June.

Around 98% of 50 economists across India predicted a rate cut of 25 bps, which will take the repo rate cut to 5.75%. Consequently, this would be the first repo rate cut below 6% since September 2022.

"With headline inflation now at a multi-year low, the Reserve Bank of India (RBI) is poised to cut the repo rate by another 25bps (to 5.75 percent) after the MPC meeting on Friday 6th June," said Shilan Shah, Deputy Chief Emerging Market Economist at Capital Economics.

How the RBI Repo Rate Cut Has Impacted FD Rates?

Whenever there is a repo rate cut by the RBI, banks generally reduce their term deposit (also known as fixed deposit) rates. Several banks slashed their fixed deposit rates when the RBI announced a repo rate cut in April.

In the general case, fixed deposit rates and RBI repo rate cuts follow a directly proportional relation, which means that declining RBI repo rates will translate into declining FD rates in the long term. Same goes with reverse case, ie rising RBI repo rate will coincide with increasing fixed deposit rates in long term.

"Presently banks are offering FD rates between 6.1 per cent to 7.5 per cent for 1-year tenure. If 50 bps cut is considered for the FD rates, then the likely range will adjust to 5.8 per cent to 7 per cent. Now, considering inflation adjusted return for in December 2024, it was around 2.5 -3.0 per cent. Considering the RBI's Q1 FY26 inflation forecast of 3.5% to be true, the return will be 3.5 - 4 per cent," explained Ajay Kumar Singh - General Manager - Smead, Punjab National Bank.

He also mentioned that banks may consider the credit off take and liquidity to offer competitive rate prevailing in the market, he added.

RBI's repo rate increase of 250 bps during May 2022 to January 2025 coincided with an increase in weighted average domestic term deposit rates (WADTDRs) on fresh and outstanding deposits increased by 253 bps and 199 bps, respectively, during the same period, according to SBI Research's Prelude to MPC Meeting: June 4-6, 2025 report.

RBI Repo Rate Cut: Will FD Rates Decline In The Coming Months?

As the RBI is expected to announce another repo rate cut in June and opt for further rate cuts in the coming months, there are chances of a decline in FD rates in future.

"Banks have already reduced interest rates on savings accounts to the floor rate of 2.70%. Also, fixed deposit (FDs) rates have been reduced in the range of 30-70 bps since February 2025. Transmission to deposit rates is expected to be strong in the coming quarters," stated the SBI economist department.

Fixed deposits are among the key investment options preferred by senior citizen investors who enjoy relatively higher interest rates. Decrease in the FD interest rate in the coming days is likely to make the long-term investment instrument a less attractive option among risk-averse investors.

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