Are Low FD Rates Disappointing You? THESE Banks Are Offering 8% Returns On Fixed Deposits
The Indian economy is going through a phase of transition. With the Reserve Bank of India (RBI) taking a more accommodative stance on interest rates after a series of repo rate cuts, many investors who rely on fixed deposits (FDs) for stable returns are beginning to feel disappointed.
Fixed deposits have long been the preferred choice for millions of Indians who seek safety, stability, and guaranteed returns. Whether you’re a salaried individual, a senior citizen, or someone nearing retirement, FDs have always provided peace of mind against the volatility of the stock market.
However, recent repo rate cuts have led to a fall in interest rates offered by major banks. Large lenders such as State Bank of India (SBI), Punjab National Bank (PNB), and HDFC Bank have revised their rates downwards, now hovering between 6% and 7% for most tenures.
Despite this trend, the good news is — some small finance banks and select private banks continue to offer attractive FD rates between 7% and 8%, and in certain cases, even slightly higher.
If you’re disappointed with low FD returns from traditional banks, this guide will help you identify institutions currently offering the best FD interest rates in India and how you can maximize your returns without taking unnecessary risks.
🏦 Why Fixed Deposits Remain a Popular Choice
Even in a changing economic environment, fixed deposits continue to be one of India’s most popular investment instruments. Here’s why:
Safety of Capital:
FDs are considered one of the safest investment options as they are not subject to market volatility. You know exactly what return you will get at the time of maturity.Guaranteed Returns:
The interest rate on FDs is fixed throughout the tenure. Unlike mutual funds or stocks, you don’t need to worry about daily market fluctuations.Flexible Tenure:
Banks and NBFCs allow investors to choose FD tenures ranging from 7 days to 10 years, offering flexibility based on individual goals.Regular Income for Seniors:
Senior citizens prefer FDs as they offer additional interest (usually 0.5% more) and provide regular income through monthly or quarterly payouts.Loan Against FD:
In emergencies, you can avail of loans against your FD without breaking it. This helps maintain liquidity while your investment continues to earn interest.Tax Benefits:
Certain fixed deposits (5-year tax-saving FDs) qualify for deductions under Section 80C of the Income Tax Act, up to ₹1.5 lakh per annum.
📉 Why FD Rates Have Dropped Recently
To understand why FD rates have fallen, it’s important to look at the repo rate, which is the rate at which RBI lends money to commercial banks.
When the RBI cuts the repo rate, borrowing becomes cheaper for banks. In turn, banks reduce the interest rates they offer on savings accounts and fixed deposits.
The primary reason behind these cuts is to stimulate borrowing and spending in the economy, especially when growth slows down or inflation is under control.
However, for investors relying on interest income, this means lower returns on deposits. While blue-chip banks have adjusted rates between 6% and 7%, smaller banks are offering higher interest to attract new depositors and expand their customer base.
💰 Banks Offering FD Rates Between 7% and 8%
If you’re looking for better returns without taking on too much risk, here are some of the top banks currently offering high FD rates in India:
🟩 1. Jana Small Finance Bank (JSFB)
Interest Rate for General Citizens: Up to 8% p.a.
For Senior Citizens: Up to 8.5% p.a.
Best Tenure: 60 months
Highlights:
Jana Small Finance Bank offers an interest rate of 8% on FDs for a tenure of 60 months.
Senior citizens can enjoy an even higher rate of 8.5% for the same duration.
The bank’s FD rates range from 6% to 8% depending on tenure.
Interest can be received monthly, quarterly, or on maturity.
Why It Stands Out:
JSFB provides one of the highest returns among all small finance banks. It’s an ideal choice for investors who can lock in their funds for 5 years and want to beat inflation comfortably.
🟨 2. Suryoday Small Finance Bank
Interest Rate for General Citizens: Up to 8.05% p.a.
For Senior Citizens: Up to 8.10% p.a.
Best Tenure: 5 years
Highlights:
Offers the highest FD rate of 8.05% for a 5-year tenure.
Senior citizens get an additional 0.05%.
Offers around 7.25% interest for FDs between 18 months and 2 years.
Why It Stands Out:
Suryoday Bank is consistent in offering high interest rates even when other banks reduce theirs. It’s particularly attractive for medium to long-term investors who prefer small finance institutions.
🟧 3. Utkarsh Small Finance Bank
Interest Rate for General Citizens: Up to 7.65% p.a.
For Senior Citizens: Up to 8.15% p.a.
Best Tenure: 2 to 3 years
Highlights:
Offers 7.65% interest for 2-year and 3-year tenures.
One-year FD rate is around 6%.
Monthly and quarterly interest payout options available.
Why It Stands Out:
Utkarsh SFB focuses on short- to medium-term tenures. This makes it ideal for those who don’t want to lock in funds for too long but still want high returns.
🟦 4. Bandhan Bank
Interest Rate for General Citizens: Up to 7.2% p.a.
For Senior Citizens: Up to 7.7% p.a.
Best Tenure: 2 years to less than 3 years
Minimum Deposit: ₹1,000
Highlights:
Offers 7.7% for senior citizens and 7.2% for others.
Flexible tenure and low minimum deposit requirement.
Known for reliability and strong customer service.
Why It Stands Out:
Bandhan Bank combines safety with decent returns. Its accessibility and small minimum deposit make it suitable for first-time investors and senior citizens alike.
🟫 5. Fincare Small Finance Bank (Bonus Mention)
Interest Rate for General Citizens: Up to 8.11% p.a.
For Senior Citizens: Up to 8.71% p.a.
Best Tenure: 1000 days
Highlights:
Fincare Bank’s 1000-day FD is one of the most popular schemes.
The returns are among the highest in the small finance category.
Why It Stands Out:
If you’re comfortable with a 1000-day lock-in period, this FD offers one of the best risk-adjusted returns in the current market.
📊 Comparative Table of FD Rates (as of November 2025)
| Bank Name | General Citizen Rate | Senior Citizen Rate | Best 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 |
📜 Understanding TDS on Fixed Deposits
Interest earned on fixed deposits is taxable. Banks deduct TDS (Tax Deducted at Source) if your annual interest income exceeds ₹40,000 (₹50,000 for senior citizens).
Key Points:
TDS Rate: 10% if PAN is submitted; 20% if not.
TDS Threshold: ₹40,000 for individuals (₹50,000 for senior citizens).
No TDS Scenario: You can avoid TDS by submitting Form 15G (for individuals) or Form 15H (for senior citizens) if your total income is below the taxable limit.
Example:
If you have an annual income of ₹11 lakh under the new tax regime (FY 2025-26), you will not owe any income tax due to the Section 87A rebate, which applies to incomes up to ₹12 lakh. Hence, you can claim a refund for TDS deducted by the bank while filing your ITR.
Tip:
Always review your bank’s TDS deduction in Form 26AS or the Annual Information Statement (AIS) on the Income Tax Portal to ensure correctness.
📆 How to Choose the Best FD for You
When selecting a fixed deposit, consider the following factors beyond just the interest rate:
Bank’s Credibility:
Choose a bank regulated by the RBI and covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC), which insures deposits up to ₹5 lakh per depositor per bank.Tenure Flexibility:
Match your FD tenure with your financial goals. Short-term FDs provide liquidity, while long-term FDs help in compounding.Payout Option:
Opt for cumulative FDs if you don’t need regular income (interest gets reinvested). For retirees, non-cumulative FDs with monthly or quarterly interest payout work better.Interest Rate Lock-In:
Once you open an FD, your interest rate remains fixed for the entire tenure. Locking your FD during a high-rate phase ensures better returns even if rates drop later.Premature Withdrawal Clause:
Always check the penalty charges if you decide to break the FD before maturity. Usually, the penalty is between 0.5% and 1% of the applicable rate.
🧠 Smart Strategies to Maximize FD Returns
Ladder Your Investments:
Instead of putting all your money in one FD, split it across different tenures. This helps maintain liquidity and allows you to reinvest at higher rates later.Compare Online:
Use official bank websites or government-verified financial portals to compare FD rates before investing.Reinvest Maturity Amounts:
On maturity, reinvest your principal and interest together for better compounding benefits.Diversify with Multiple Banks:
Avoid placing all deposits in one bank to stay within the ₹5 lakh DICGC insurance limit.Track Repo Rate Trends:
Keep an eye on RBI’s monetary policy announcements. When repo rates start rising, FD rates follow within a few weeks.
🔍 Should You Still Invest in FDs?
Despite falling interest rates, fixed deposits remain a cornerstone of stable financial planning, especially for:
Retirees and senior citizens seeking regular income
Conservative investors avoiding equity volatility
Individuals saving for short-term goals (education, marriage, etc.)
However, to beat inflation and grow wealth faster, it’s wise to balance your portfolio by adding mutual funds, debt instruments, or government-backed savings schemes like Senior Citizens Savings Scheme (SCSS) or National Savings Certificate (NSC).
FDs provide safety and predictability, but blending them with other assets ensures both growth and stability.
🏁 Conclusion
While it’s true that major banks have lowered their FD rates, several small finance banks are still offering competitive returns up to 8% and beyond.
If you’re a conservative investor looking to preserve capital while earning decent returns, these banks — Jana SFB, Suryoday SFB, Utkarsh SFB, Bandhan Bank, and Fincare SFB — provide a solid opportunity.
Before investing, compare tenure options, check the bank’s credibility, and consider your personal tax situation. By making informed decisions and adopting smart strategies like laddering, you can maximize your FD returns safely in 2025 and beyond.
✅ Key Takeaway:
Even in a low-rate environment, smart investors find ways to earn more without taking extra risk. The secret lies in choosing the right banks, right tenures, and understanding how taxation impacts your final return.
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