Want over 9% FD returns? These small finance banks offer up to 9.1% interest

Fixed deposit (FD) interest rates across Indian banks continue to remain attractive for savers in May 2026, with returns ranging from 2.5% to as high as 9.1% annually depending on the bank, tenure, and customer category.

While large public and private sector banks are offering FD rates largely in the 6% to 7.5% range, small finance banks (SFBs) are continuing to offer significantly higher returns to attract deposits. Senior citizens are also benefiting from additional interest of 0.20% to 0.50% above regular rates.

The current FD landscape reflects a competitive deposit market as banks continue to mobilise retail deposits amid steady credit demand and evolving liquidity conditions.

Public banks vs private banks vs SFBs

Among public sector banks, Bank of India and Punjab National Bank are offering up to 6.6% for regular customers on select tenures, while State Bank of India and Bank of Baroda are offering rates up to around 6.45%. Senior citizen rates at these banks are largely ranging between 7% and 7.1%.

Private sector banks are offering relatively higher rates in some tenures. Bandhan Bank is offering up to 7.25% for regular customers and 7.75% for senior citizens on select deposits. Federal Bank is offering rates up to 6.75% for regular customers and 7.25% for senior citizens, while Axis Bank’s rates go up to 6.45% for regular depositors and 7.2% for seniors.

However, the highest rates continue to come from small finance banks. Several SFBs are offering rates between 8% and 9.1%, especially on medium-term deposits. Senior citizen returns at some smaller banks are crossing 9%, making them among the most attractive fixed-income products currently available in the banking system.

Saurabh Jain, Co-founder and CEO of Stable Money, said smaller banks are continuing to use competitive pricing to strengthen retail deposit mobilisation.

“Small finance banks continue to offer relatively higher interest rates compared to larger peers, with senior citizens currently seeing rates in the 8.25%–8.3% range and general investors around 8.1%. This reflects a broader trend where smaller banks are using competitive pricing to attract stable retail deposits,” Jain said.

“Another notable trend is the emergence of the 1.5–3 year tenure bracket as a preferred sweet spot for investors. It allows individuals to lock in relatively higher rates for a reasonable duration without overcommitting in what remains an evolving interest rate cycle.”

Focus on SFBs

He added that banks such as Utkarsh, Suryoday, and Shivalik have maintained relatively stable deposit rates, helping investors gain familiarity and comfort with fixed-income products over time.

“For instance, associations like Utkarsh Bank’s partnership with Mumbai Indians during the ongoing T20 season indicate a growing push towards retail participation in fixed-income products,” he said.

Jain also cautioned investors to balance returns with safety considerations.

“Fixed deposits remain one of the more predictable investment avenues, and with DICGC insurance coverage of up to ₹5 lakh per depositor per bank, they continue to serve as a dependable component of a diversified portfolio focused on capital preservation and steady income,” he added.

Financial planners say many investors are currently preferring medium-term FDs as expectations grow that interest rates could gradually soften over the next 12–18 months if liquidity conditions improve further.

At present, the one-year to three-year tenure segment remains the sweet spot for FD investors seeking higher returns with relatively lower duration risk.