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Repo rate rises to 5.50%: How a ₹20 lakh FD could earn more in 5 years

The Reserve Bank of India raised the repo rate from 5.25% to 5.50%, a 0.25 percentage-point increase. If banks pass the change on to new fixed deposits, the example in the report shows a ₹20 lakh FD earning ₹34,965 more over 5 years at a 7.25% rate.

Editor: AI News 24x7 Published: 08 Oct 2026, 04:58 PM Updated: 08 Oct 2026, 04:58 PM

Repo rate rises to 5.50%: How a ₹20 lakh FD could earn more in 5 years.

The Reserve Bank of India has raised the repo rate from 5.25% to 5.50%, increasing it by 0.25 percentage points, or 25 basis points. The decision was announced after the Monetary Policy Committee meeting on 7 October by RBI Governor Sanjay Malhotra.

The change can affect loans, EMIs and bank fixed deposits. For FD customers, the reported impact depends on whether a bank raises its deposit rates after the repo rate increase.

How the repo rate can affect FDs

The repo rate is the interest rate at which the RBI lends to commercial banks. When this rate rises, banks may increase the interest rates offered on fixed deposits. This can benefit customers opening new FDs after the revised rates become available.

Existing FD holders generally continue to receive returns at the rate applicable when their deposits were booked. The report therefore distinguishes between an earlier FD example and a new deposit made after the rate increase.

₹20 lakh FD example over 5 years

The example uses a ₹20 lakh fixed deposit for 5 years. Under the earlier scenario, the FD interest rate is 7%, linked in the example to the 5.25% repo rate. The stated interest earned is ₹8,29,556, taking the total maturity amount to ₹28,29,556.

Under the new scenario, the FD rate rises to 7.25%, alongside the repo rate moving to 5.50%. On the same ₹20 lakh deposit over 5 years, the stated interest is ₹8,64,521. The total maturity amount is ₹28,64,521.

The difference between the two examples is ₹34,965. This comparison assumes that the bank passes the 0.25 percentage-point repo rate increase through to the FD rate.

The figures are an illustration of the effect of a higher deposit rate. The report says that the benefit applies to customers taking a new FD, while deposits already booked remain linked to their earlier interest rate.

What does 25 bps mean?

Bps means basis points. In this example, 25 bps represents 0.25 percentage points.

Conclusion

The reported example shows that a ₹20 lakh FD could mature at ₹28,64,521 instead of ₹28,29,556 over 5 years when the assumed FD rate rises from 7% to 7.25%. The stated additional benefit is ₹34,965, mainly for customers opening a new deposit at the higher rate.