With the Reserve Bank of India cutting the repo rate by 25 basis points and shifting its stance to “accommodative,” interest rates on fixed deposits (FDs) are expected to fall further this year. This is especially concerning for senior citizens who rely on FDs for regular income.
Banks have already started reacting. For example, Bank of India is ending its 400-day special FD scheme, and HDFC Bank has cut its savings account interest rate.
Act Now: Lock in Higher Rates
Senior citizens should take advantage of the current FD and small saving scheme rates before they drop. The government has kept rates for small savings unchanged for the April–June 2025 quarter, which presents a good opportunity.
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Senior Citizen Savings Scheme (SCSS) offers 8.2% interest and allows a couple to invest up to ₹60 lakh.
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Post Office Monthly Income Scheme (POMIS) offers 7.4% interest.
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National Savings Certificates (NSC) offer 7.7% interest annually.
Other Options to Consider
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AAA-rated corporate FDs and those from reputed non-banking firms offer better returns than banks and can be used for regular income via monthly interest payouts.
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Long-term FDs are better right now, even if their rates are slightly lower than short-term ones. The interest rate cycle is expected to stay low for the next few years, so locking in now makes sense.
Diversify with Equities
Even with market fluctuations, financial advisors suggest allocating 10–20% of savings to equities through hybrid mutual funds or balanced advantage funds. These provide potential growth without taking on too much risk.
Stay Calm Despite Lower Rates
While falling rates might seem alarming, it’s important not to panic. With inflation easing, day-to-day costs may reduce, balancing out the impact of lower returns.
