If you are planning to invest in Fixed Deposits (FDs), looking beyond traditional public sector banks could help you earn better returns.
Currently, many Small Finance Banks (SFBs) are offering much higher FD interest rates compared to large government-owned banks.
Small finance banks are offering interest rates of up to 8.1% for general customers and up to 8.5% for senior citizens.
In comparison, major public sector banks are offering around 6.45% to 6.75% interest on FDs.
This difference means investors can earn nearly 1.65 percentage points more returns by choosing some small finance banks.
Small Finance Banks Lead in FD Interest Rates
According to an analysis of FD rates of 28 banks and NBFCs by Stable Money, small finance banks currently dominate the list of banks offering the highest FD returns.
Top banks offering the highest FD rates for general customers include:
Suryoday Small Finance Bank: Up to 8.10%
Utkarsh Small Finance Bank: Up to 8.10%
Jana Small Finance Bank: Up to 7.85%
Ujjivan Small Finance Bank: Up to 7.75%
Northeast Small Finance Bank: Up to 7.75%
Unity Small Finance Bank: Up to 7.75%
Bandhan Bank: Up to 7.45%
Interestingly, six out of the top seven banks offering the highest FD interest rates are small finance banks.
Private Banks Also Offering Better Returns
Small finance banks are not the only ones offering attractive FD rates. Several private banks are also increasing their interest rates to attract customers.
Currently:
Bandhan Bank offers up to 7.45% for general customers.
IndusInd Bank offers up to 7% on three-year FDs for general customers and up to 7.75% for senior citizens.
IDFC FIRST Bank, Yes Bank, and RBL Bank offer rates around 7.2% to 7.25%.
Experts say banks regularly change FD rates depending on their liquidity requirements and expectations about future interest rates.
Public Sector Banks Offer Lower FD Rates
Compared to small finance and private banks, interest rates at most public sector banks remain lower.
Among government banks:
Bank of Baroda: Up to 6.75%
Bank of India: Up to 6.70%
Punjab National Bank: Up to 6.60%
Indian Overseas Bank: Up to 6.60%
State Bank of India (SBI): Up to 6.45%
Many public sector banks are currently offering their highest rates on special tenure FDs ranging between 444 and 555 days instead of regular one, three, or five-year deposits.
Senior Citizens Can Earn More
Senior citizens get additional interest benefits on fixed deposits.
The highest FD rates for senior citizens are currently offered by:
Shivalik Small Finance Bank: Up to 8.5%
Unity Small Finance Bank: Up to 8.5%
Jana Small Finance Bank: Up to 8.3%
Ujjivan Small Finance Bank: Up to 8.3%
Suryoday Small Finance Bank: Up to 8.25%
Utkarsh Small Finance Bank: Up to 8.25%
Among large banks, Bank of India offers up to 7.45% interest for senior citizens, while Axis Bank and Bank of Baroda offer up to 7.25%.
NBFCs Also Provide Attractive FD Options
Some Non-Banking Financial Companies (NBFCs) are also offering competitive FD rates.
Current rates include:
Shriram Finance: 7.5% for general customers and up to 8% for senior citizens.
Mahindra Finance: 7.45% for general customers and 7.8% for senior citizens.
Bajaj Finance: 7.4% for general customers and up to 7.75% for senior citizens.
However, their rates are still slightly lower than the highest offerings from small finance banks.
Don’t Choose an FD Only Based on Interest Rate
While higher interest rates can increase returns, experts advise investors not to select an FD only on this basis.
Before investing, consider:
The bank’s financial stability
FD tenure
Withdrawal flexibility
Deposit insurance coverage
Deposits in banks are covered by DICGC insurance up to ₹5 lakh per bank.
Experts suggest spreading investments across different banks and choosing different maturity periods to balance safety and returns.
