Choose your FD scheme: How public and private banks’ FD rates compare for depositors

Fixed deposits (FDs) continue to remain one of the most preferred investment options for conservative investors in India, especially amid volatile equity markets and uncertain global economic conditions. Offering guaranteed returns and capital protection, FDs are widely used for emergency funds, short-term financial goals, and post-retirement income planning.

In 2026, banks across categories — public sector banks, private sector banks, and small finance banks — are offering competitive deposit rates as liquidity conditions tighten and lenders compete to mobilise deposits. Currently, FD interest rates offered by scheduled banks range between 2.5% and 8.1% annually depending on tenure and bank category.

Small Finance Banks

Small finance banks continue to dominate the FD rate charts in 2026. Jana Small Finance Bank is currently offering up to 8.11% annually, while Suryoday Small Finance Bank and Utkarsh Small Finance Bank are offering rates up to 8.10%.

Unity Small Finance Bank, Shivalik Small Finance Bank, and Equitas Small Finance Bank are also offering rates above 7.4% on select tenures. These banks are aggressively attracting deposits by offering higher yields compared to larger lenders.

However, financial planners often caution investors to balance higher returns with diversification and deposit insurance considerations while investing in smaller banks.

Public Sector Banks

Public sector banks (PSBs) continue to appeal to risk-averse depositors due to their government backing and perceived safety. However, their FD rates remain relatively lower compared to private and small finance banks.

Among PSU lenders, Punjab & Sind Bank currently offers one of the highest slab rates at 6.75%, followed by Bank of India at 6.70%, and Bank of Maharashtra at 6.65%.

State Bank of India (SBI), the country’s largest lender, offers up to 6.45% on fixed deposits, while Punjab National Bank, Canara Bank, and Union Bank of India offer rates between 6.45% and 6.60%.

For one-year deposits, most PSU banks are offering rates in the range of 6.1% to 6.5%, while five-year FD rates largely remain around 6%.

Private Banks

Private sector banks are currently offering relatively better rates than large PSU banks, particularly on medium-term deposits. Several mid-sized private lenders are offering rates above 7%.

IDFC FIRST Bank, Bandhan Bank, Tamilnad Mercantile Bank, and Jammu & Kashmir Bank are offering rates up to 7.25% on select tenures. CSB Bank currently offers one of the highest private bank FD rates at 7.35%.

Among larger private banks, HDFC Bank and ICICI Bank offer up to 6.5%, while Axis Bank offers 6.45%. Kotak Mahindra Bank and South Indian Bank offer rates between 6.75% and 6.8%.

Yes Bank continues to remain among the more aggressive private lenders, offering up to 7% on fixed deposits.

What depositors do?

Experts say the choice between PSU and private banks depends on an investor’s priorities. PSU banks are often preferred for safety, stability, and strong government ownership perception, while private banks generally offer better returns and more competitive tenure-based pricing.

Small finance banks provide the highest yields but may be suitable mainly for investors willing to take slightly higher risk for better returns.

Senior citizens continue to receive additional interest benefits of 0.25% to 0.75% across most banks, making FDs an attractive income option for retirees in a high-interest-rate environment.

Will banks increase their FD rates in near future?

As per news reports, Indian banks may gradually raise retail fixed deposit (FD) rates as tighter liquidity conditions and rising borrowing costs increase pressure to attract deposits.

While a full-fledged FD rate hike cycle has not yet begun, several banks, including Axis Bank and ICICI Bank, revised deposit rates in April 2026. Mid-sized lenders such as CSB Bank, Karnataka Bank, South Indian Bank, and Jana Small Finance Bank also increased rates amid funding pressures.

Small finance banks continue offering some of the highest FD rates, ranging between 7.7% and 8.1% for select tenures, while larger banks remain cautious due to stronger CASA deposits and better liquidity access.

Funding stress is becoming more visible in the certificates of deposit (CD) market. One-year CD rates rose sharply to around 7.7% in May 2026 from nearly 7% in April, reflecting tighter liquidity conditions. Banking system liquidity surplus has reportedly narrowed to around Rs 50,000 crore from nearly Rs 3 lakh crore in April.

Analysts say higher wholesale borrowing costs could gradually push banks to raise retail FD rates if credit demand remains strong. Elevated crude oil prices, geopolitical tensions, and rupee pressure are also strengthening expectations that interest rates may stay higher for longer.