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Real Interest Rate
The real interest rate is the nominal interest rate minus inflation. If a fixed deposit pays 7% and inflation is 5%, the real return is roughly 2%. If inflation is higher than the interest rate, the real rate is negative and savings lose purchasing power.
Why It Matters
Savers should judge every return in real terms. A big number that trails inflation is a quiet loss.
In India
In late 2025, with inflation near 0.25%, a 6.5% fixed deposit earned a real return of over 6%. By September 2026, with inflation at 5.54%, the same deposit earned barely 1%.