In recent months, many banks have reduced the interest rates on fixed deposits (FDs) several times. This is a big concern for senior citizens, as most of their money is invested in FDs. However, senior citizens are still getting attractive interest rates of up to 8.8% on fixed deposits.
Public Sector Banks – Safe Option with Good Interest
If you want to open a fixed deposit (FD) in a government bank, there are still good interest rates for senior citizens. These banks are safe and trusted. But their interest is a little less than private or small banks.
| Bank Name | Highest Interest Rate (%) |
|---|---|
| Punjab & Sind Bank | 7.55% |
| Bank of India | 7.50% |
| Central Bank of India | 7.50% |
| Indian Overseas Bank | 7.45% |
| Indian Bank | 7.40% |
Private Banks – Better Rates and Flexible Time
Private banks give a little more interest than government banks. They also give more options for how long you can keep the FD. Some banks like SBM are giving up to 8.55% interest.
| Bank Name | Highest Interest Rate (%) |
|---|---|
| SBM Bank | 8.55% |
| Bandhan Bank | 7.90% |
| CSB Bank | 7.90% |
| DCB Bank | 7.90% |
| RBL Bank | 7.80% |
Small Finance Banks – Highest Interest but Slightly More Risk
If you want more return and can take a little more risk, then small finance banks are a good option. They are giving the highest FD interest to senior citizens right now.
| Bank Name | Highest Interest Rate (%) |
|---|---|
| Suryoday Small Finance Bank | 8.80% |
| Utkarsh Small Finance Bank | 8.75% |
| Shivalik Small Finance Bank | 8.55% |
| Slice Small Finance Bank | 8.50% |
| Fincare Small Finance Bank | 8.25% |
RBI Reduced Repo Rate
In 2025, the Reserve Bank of India (RBI) reduced the repo rate by 1%. This means banks can take loans from RBI at a lower cost. So, they also reduce loan and FD interest rates. Banks do not need to collect money from customers at high interest now.
TDS Relief for Senior Citizens
The 2025 budget gave good news to senior citizens. From April 1, 2025, banks will cut TDS (tax) only if the interest on FDs is more than ₹1 lakh in a year. Earlier this limit was ₹50,000. If a senior citizen’s total income is less than ₹12 lakh (from FY26), they can stop TDS fully by giving Form 15H to the bank.
What Should Senior Citizens Do?
Even if the interest is going down, FD is still a good and safe option. Senior citizens should check all bank rates and choose the best one. Book FD in July 2025 at good rates before they go down more.