Investment returns for floating rate FDs are based on a reference rate, such as the repo rate of the Reserve Bank of India (RBI) or a Treasury Bill yield. In contrast to a regular Fixed Deposit (FD), where the interest rate is fixed for the duration of the deposit, the interest rates applicable on a floating rate fixed deposit are linked to the prevailing repo rate. Since floating-rate fixed deposits are benchmarked to repo rates and provide you with a dynamic rate of interest, the interest rate automatically resets periodically to reflect the repo rates that were in effect. The Reserve Bank of India (RBI), in its monetary policy meeting held on December 7, 2022, hiked the repo rate by 0.35%, bringing it to 6.25%.
