As the Reserve Bank of India prepares for its next Monetary Policy Review, interest-rate expectations are back in focus. Movements in the repo rate have a direct bearing on EMIs, loan tenures, and fixed-deposit returns. Even when the RBI holds its stance, banks often make quick adjustments to both lending and deposit rates in the following days. This makes the period before the policy announcement a sensible time to take stock of your finances. A few timely steps can help you protect your money, reduce costs, and make the most of changing market conditions.
Review your loans
Loans linked to external benchmarks such as the repo rate can reset soon after policy changes. Review the interest rates on your home loan, personal loan, and other borrowings. Check whether your tenure has been extended quietly due to rising rates in recent months, as this increases your total interest outgo. Explore whether refinancing to a lower rate is possible, especially if your credit score has improved. Even a small reduction can translate into meaningful savings over the life of a long-term loan.
Lock in fixed deposits at current rates
If you have idle funds, consider locking them into fixed deposits while current rates hold. Deposit rates often fall when policy rates soften. Compare FD rates across banks, including smaller private and select public-sector banks that tend to offer higher rates. A one to three-year tenure helps you balance liquidity with certainty of returns. You can also adopt a laddering strategy by splitting your investment across multiple tenures. This cushions you against future rate declines while ensuring some deposits mature each year.
Rebalance your investment portfolio
Rate expectations influence different asset classes in different ways. Long-duration debt funds usually gain when rates fall, while short-duration funds remain steady when rates stay high. Equity markets may also react to policy cues. This is a good moment to review your asset allocation and ensure it matches your long-term goals. If a large portion of your savings is parked in low-yield deposits, consider shifting a part into suitable long-term options such as debt funds or hybrid funds. A measured rebalancing helps you benefit from rate cycles without taking undue risk.
Time major borrowing decisions wisely
If you are planning a home purchase, car purchase, or business expansion, wait for the policy outcome. Even a small rate cut can reduce your long-term EMIs and total borrowing cost. Delaying your decision by a short period can ensure you do not commit to higher rates just before they ease.
Strengthen your liquidity buffer
Before the review, assess your emergency fund. Aim to keep at least three to six months of expenses in a low-risk account. This protects you from sharper EMIs, unexpected bills, or market volatility. Maintaining liquidity gives you flexibility regardless of policy changes.
With loans, deposits, and investments all reacting to rate signals, this pre-policy window is a good opportunity to prepare and stay ahead of financial changes.
(The author is Associate Analyst, Communications at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)
