fixed deposit
Even though most of the banks have continuously reduced the fixed deposit (FD) rates after the Reserve Bank of India (RBI) cut the repo rate by a total of 125 basis points from February 2025, Bank of India has taken the opposite step and increased the interest rates on some select medium and long term deposits. According to an official release, this state-owned bank has increased FD rates on deposits of less than Rs 3 crore for tenures ranging from 1 year to 3 years from May 18. This step has been taken at a time when many government and private banks have cut deposit rates to save their margins after the rate softening by RBI, due to which the repo rate has come down to 5.25 percent.
Revised FD rate of Bank of India
(Source: Bank of India)
Bank of India said that senior citizens will get an additional 50 basis points on deposits for tenure between 6 months to less than 3 years, while super senior citizens will get an additional 65 basis points. For deposits with a tenure of 3 years and above, this additional benefit increases to 75 basis points for senior citizens and 90 basis points for super senior citizens.
Banks are following RBI’s repo rate
The fixed deposit market is under pressure since RBI started cutting rates in February 2025. Many private lenders and some public sector banks have reduced returns on fixed deposits, especially in 1-3 year tenures, as low policy rates gradually trickle down to deposit products. Despite this trend, FD remains a popular option for traditional investors as it offers capital protection, predictable returns and flexible tenure options. However, experts say that investment decisions should not be taken only on the basis of rates.
FD investors should check whether the rate is available only for specific tenures, compare callable and non-callable deposits, understand the penalty for premature withdrawal and evaluate the post-tax returns. Senior citizens should also compare special category benefits, as the rate difference can be significant. Bank of India is also offering an additional return of 15 basis points on non-callable deposits of more than Rs 1 crore for a minimum tenure of one year.
