For many of us, especially those building our savings in places like Tier 2 and Tier 3 cities, the Fixed Deposit, or FD, is still a very important part of life. It is that secure, dependable place you put money you know you will need later. The stock market can be a rollercoaster, but the FD offers a guaranteed return. That promise of certainty is why so many people trust it.
If you are planning your family’s next few years, understanding the likely trend of FD rates in India over the coming year, 2026, is quite important.
Understanding What Moves Interest Rates
To figure out what the FD rates in India may be, you need to consider two main things. The first is the Reserve Bank of India, or RBI, and the second is inflation, which is just a measure of how much prices are rising generally.
The RBI sets the key policy rate, which we call the repo rate. Think of this as the cost for banks to borrow money overnight from the RBI. When the RBI decides to raise this rate, it makes it more expensive for financial institutions to get funds. To attract more deposits from the public—that is, your money—they usually have to raise the interest rates they offer on fixed deposits. This is the simple logic behind the recent upward movement we have seen.
Conversely, when the RBI lowers the repo rate, the pressure on banks to offer high deposit rates eases, and FD rates tend to fall. So, the rates offered by issuers is generally a direct reaction to the RBI’s moves.
The other thing that really matters is inflation. I mean, if the cost of basic items goes up by 8% this year, and your fixed deposit is only giving you a 6% return, then the money you get back, while more in rupees, buys less than it did before. You are losing purchasing power. Nobody wants that, of course. The RBI is always trying to keep price rises stable, and their decisions on the repo rate are mostly focused on managing inflation.
Now, here is the latest point: the RBI just cut the repo rate to 5.25% in December 2025. They did this because retail inflation has dropped significantly, to exceptionally low levels. This rate cut clearly tells us that the cycle of rising interest rates is shifting.
What Does a Falling Rate Cycle Mean for Your FD?
With the RBI cutting its key rate and forecasting much lower inflation for the 2025–26 financial year, the overall direction for interest rates is now likely to be down.
For you, the investor, this shift has two clear implications:
- For New Fixed Deposits: If the cycle is heading down, banks and NBFCs will slowly but surely start reducing the rates they offer on new deposits. The rates available right now might be some of the better ones we see for a while.
- For Existing Fixed Deposits: The rate you locked in when you started your FD remains fixed for the full term. This security is the core reason why FDs are so popular.
If you have a decent amount of money just sitting in a regular savings account, or in a very short-term FD, it is probably a good idea to consider moving it into a longer-term deposit now to secure the current return.
Institutions like PNB Housing Finance offer various fixed deposit plans that can fit different time goals or investor needs, sometimes with rates that are quite competitive compared to what large banks offer. For better planning, looking up a reliable fixed deposit calculator can help you estimate your maturity value.
Practical Steps for Investing in 2026
A very sensible way to invest in FDs is laddering. This means you take your total savings amount and divide it into several fixed deposits, each having a different maturity date. You might set one to mature in one year, another in two years, and so on.
When the first one-year FD matures in 2026, you can simply take that ₹1 lakh and reinvest it into a new five-year FD, taking whatever rate is on offer at that exact time. This strategy gives you two things: you get access to a portion of your money every year, which helps with liquidity, and you get to take advantage of any better rates that might come later without locking all your money in at one single time.
It is generally a good time to consider slightly longer tenures when rates seem to be on a downward trend. By locking in a good rate for, say, five years today, you protect your savings from future rate reductions. Looking through these points early can make the process easier when you apply.
