For decades, Fixed Deposits (FDs) have been the go-to investment option for Indian households — safe, predictable, and easy to understand. Whether you’re a retiree looking for steady income or a young professional saving for future goals, FDs have always provided the sense of financial stability that market-linked investments can’t guarantee.
But things are changing.
Over the past few months, the Reserve Bank of India (RBI) has cut the repo rate, which is the rate at which it lends to commercial banks. The aim was to boost growth by encouraging cheaper loans. However, this move has led to a sharp decline in FD interest rates across major banks.
While big players like SBI, PNB, ICICI Bank, and HDFC Bank are now offering only around 6%–7%, some smaller and newer banks are offering much higher rates — up to 8% and even above for senior citizens.
If you’ve been disappointed by your bank’s latest FD renewal rate, this guide will show you which banks are currently offering the best returns on FDs in 2025, along with practical tips to maximize your income safely.
🏦 Why FDs Still Matter in 2025
Before we jump into the high-return options, let’s understand why FDs remain a cornerstone of Indian investing — even when rates fall.
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Capital Safety – Your principal is protected, and you know the exact maturity amount at the time of investment.
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Fixed Returns – FD rates don’t change during the tenure, shielding you from market volatility.
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Flexible Tenures – You can choose any duration between 7 days to 10 years.
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Ideal for Seniors – Senior citizens earn an additional 0.25–0.75% interest and can choose monthly or quarterly payouts.
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Tax Benefits – Five-year tax-saving FDs qualify for deductions under Section 80C of the Income Tax Act (up to ₹1.5 lakh).
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Liquidity Options – FDs can be used as collateral for loans without having to break them.
So, while returns have dipped slightly, the safety, predictability, and convenience make FDs an essential part of every investor’s portfolio.
📉 Why FD Rates Are Falling
FD rates are linked to the repo rate, which the RBI changes to influence borrowing costs in the economy.
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When RBI cuts the repo rate, banks get cheaper funds and pass on the benefits through lower deposit and lending rates.
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The purpose is to stimulate growth and encourage consumption, especially during periods of low inflation or slow economic activity.
This monetary easing benefits borrowers but disappoints savers, especially retirees and conservative investors.
However, some smaller banks — especially small finance banks (SFBs) — still offer higher FD rates to attract new depositors and strengthen their balance sheets. These banks are regulated by the RBI and provide the same ₹5 lakh DICGC deposit insurance, making them a reasonably safe choice for diversified investments.
💰 Top Banks Offering 7%–8% Interest on FDs
Let’s look at the leading banks that continue to reward their depositors with strong interest rates in 2025.
🟩 1. Jana Small Finance Bank
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Interest Rate (General): Up to 8.00% p.a.
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Interest Rate (Senior Citizens): Up to 8.50% p.a.
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Best Tenure: 60 months
Highlights:
Jana Small Finance Bank offers one of the highest FD rates in the country, particularly for longer tenures. For 5-year deposits, regular customers earn 8%, while senior citizens can enjoy up to 8.5%.
Why Choose It:
Ideal for those who prefer long-term safety and higher fixed returns. The bank is RBI-regulated and provides multiple payout options (monthly, quarterly, or on maturity).
🟨 2. Suryoday Small Finance Bank
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Interest Rate (General): Up to 8.05% p.a.
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Interest Rate (Senior Citizens): Up to 8.10% p.a.
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Best Tenure: 5 years
Highlights:
Suryoday SFB’s 5-year FD offers the highest rate among small finance banks. Even for shorter tenures between 18–24 months, the interest remains around 7.25%.
Why Choose It:
Best suited for investors looking for stable long-term returns with modest flexibility. The bank’s consistent performance makes it a reliable option in the SFB segment.
🟧 3. Utkarsh Small Finance Bank
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Interest Rate (General): Up to 7.65% p.a.
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Interest Rate (Senior Citizens): Up to 8.15% p.a.
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Best Tenure: 2–3 years
Highlights:
Utkarsh offers excellent medium-term returns, especially for FDs maturing between 2 and 3 years. One-year FDs are slightly lower at around 6%.
Why Choose It:
Perfect for investors who don’t want to lock in their funds for too long but still want to enjoy above-average returns.
🟦 4. Bandhan Bank
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Interest Rate (General): Up to 7.20% p.a.
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Interest Rate (Senior Citizens): Up to 7.70% p.a.
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Best Tenure: 2–3 years
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Minimum Deposit: ₹1,000
Highlights:
Bandhan Bank offers strong returns with excellent accessibility. It’s a well-established private bank known for customer-centric services.
Why Choose It:
If you prefer the security of a large private bank and a low minimum investment amount, Bandhan Bank strikes a perfect balance between safety and returns.
🟫 5. Fincare Small Finance Bank (Bonus Pick)
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Interest Rate (General): Up to 8.11% p.a.
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Interest Rate (Senior Citizens): Up to 8.71% p.a.
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Best Tenure: 1000 days
Highlights:
Fincare’s 1000-day FD is among the highest-yielding options available. The bank offers both cumulative and non-cumulative payout choices.
Why Choose It:
Ideal for those seeking high returns with a slightly unconventional tenure. The bank’s steady growth adds to its reliability.
📊 FD Rate Comparison (as of November 2025)
| Bank Name | General Rate | Senior Citizen Rate | Tenure |
|---|---|---|---|
| Jana Small Finance Bank | 8.00% | 8.50% | 60 months |
| Suryoday Small Finance Bank | 8.05% | 8.10% | 5 years |
| Utkarsh Small Finance Bank | 7.65% | 8.15% | 2–3 years |
| Bandhan Bank | 7.20% | 7.70% | 2–3 years |
| Fincare Small Finance Bank | 8.11% | 8.71% | 1000 days |
🧾 TDS and Taxation Rules on FDs
Interest income from FDs is taxable under the “Income from Other Sources” head. Banks deduct Tax Deducted at Source (TDS) if your annual FD interest exceeds ₹40,000 (₹50,000 for senior citizens).
Key Rules:
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TDS Rate: 10% if PAN is provided; 20% if not.
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Exemption Limit: ₹40,000 for individuals; ₹50,000 for senior citizens.
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Form 15G/15H: Submit this form to avoid TDS deduction if your total income is below taxable limits.
Example:
If your total annual income is ₹11 lakh in FY 2025–26, you may not owe any income tax under the new tax regime, due to the Section 87A rebate applicable for incomes up to ₹12 lakh. You can later claim a refund of any TDS deducted by the bank.
Tip: Always check your Form 26AS or AIS on the Income Tax Portal to verify TDS credits.
💡 Smart Ways to Maximize Your FD Returns
In a low-rate environment, strategy matters as much as the rate itself. Here are practical tips to optimize your FD earnings:
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Ladder Your FDs:
Instead of putting all your money into one FD, divide it across different tenures. When one matures, reinvest at the prevailing rate. This ensures liquidity and helps capture rate hikes. -
Compare Rates Before Investing:
Always use reliable financial portals or bank websites to compare the latest FD rates — they change frequently. -
Choose Cumulative FDs for Growth:
If you don’t need monthly income, choose cumulative FDs that reinvest the interest — the power of compounding can significantly increase your maturity value. -
Diversify Across Banks:
Keep your deposits under ₹5 lakh per bank to stay within DICGC insurance limits. -
Reinvest Maturity Amounts:
When your FD matures, reinvest both principal and interest to benefit from compounding. -
Watch RBI Announcements:
When the RBI starts hiking repo rates, FD rates follow. Keep track of monetary policy reviews to time your investments.
📆 How to Choose the Right FD
Choosing the right FD goes beyond just chasing the highest rate. Consider these factors:
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Your Financial Goal:
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Short-term (less than 1 year): Look for liquid FDs.
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Long-term (3–5 years): Choose higher fixed-rate FDs.
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Liquidity Needs:
Breaking an FD early often leads to a 0.5%–1% penalty. If you might need the money, choose multiple smaller FDs. -
Bank’s Credibility:
Always invest with RBI-licensed banks. Small finance banks are regulated but still new, so spread your risk. -
Interest Payout Option:
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Cumulative FD: Interest paid at maturity — better for compounding.
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Non-Cumulative FD: Regular payouts — ideal for retirees.
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Tax Planning:
Use tax-saving FDs under Section 80C for long-term savings with guaranteed returns.
🔍 Are FDs Still a Good Investment in 2025?
Yes — but with a few considerations.
While mutual funds, equities, and bonds can deliver higher returns, they come with volatility. FDs, on the other hand, offer stability, assured income, and peace of mind.
They’re best suited for:
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Retirees seeking predictable monthly income
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Risk-averse investors preserving capital
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Short-term savers aiming for liquidity
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Parents planning for near-term goals like education or weddings
To balance safety and growth, experts recommend using FDs as one leg of a diversified portfolio, along with debt funds, government schemes (like SCSS, NSC, or RBI Floating Rate Bonds), and low-risk hybrid funds.
🏁 Conclusion
Falling FD rates may feel discouraging, but opportunities still exist if you know where to look.
Jana SFB, Suryoday SFB, Utkarsh SFB, Bandhan Bank, and Fincare SFB currently top the list with interest rates between 7% and 8%, and even higher for senior citizens.
These banks are RBI-regulated, offer insured deposits, and provide better yields than traditional giants.
Before investing, always check the latest rates, review tax implications, and diversify across tenures and institutions.
With a smart strategy and careful selection, you can beat inflation, secure your capital, and enjoy healthy returns — all without taking on unnecessary risk.
✅ Final Takeaway:
Even in a falling-rate environment, your money can work harder — if you choose the right bank, right tenure, and smart tax plan. The key is not chasing the highest rate blindly, but investing wisely for stability and growth.
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