In the last one year, fixed deposit (FD) investors have seen softening of interest rates. Following the Reserve Bank of India’s repo rate cut by 125 basis points in 2025, banks and non-bank lenders (NBFCs) gradually reduced deposit rates for different periods of time. This has been a matter of concern for many senior citizens who depend on FD income for monthly expenses. Nevertheless, despite the rate cut, many banks are still offering good returns of up to 7.75% for senior citizens in February 2026. Let us also tell you where senior citizens can still earn more interest.
Top 5 private sector banks offering highest FD rates to senior citizens
|
bank |
Highest for senior citizens FD rate |
|
yes bank |
7.75% |
|
Bandhan Bank |
7.70% |
|
RBL bank |
7.70% |
|
IDFC first bank |
7.50% |
|
IndusInd Bank |
7.50% |
Among private lenders, Yes Bank is currently offering the highest rate for senior citizens at 7.75%. Bandhan Bank and RBL Bank are close at 7.70%. Generally, private banks are offering a good premium over PSU banks in the current cycle.
Top 5 government banks offering highest FD rates to senior citizens
|
bank |
Highest for senior citizens FD rate |
|
Bank of Baroda |
7% |
|
Punjab National Bank |
6.90% |
|
Central Bank of India |
6.75% |
|
Bank of Maharashtra |
6.70% |
|
Union Bank of India |
6.70% |
Among public sector banks, Bank of Baroda leads with 7.00%, followed by Punjab National Bank with 6.90%. Although PSU banks offer slightly lower rates than private banks, many senior citizens prefer them for their stability and reliability.
Private vs PSU: How big is the difference?
Currently, there is a difference of 0.75 percentage points (7.75% vs 7.00%) between the highest rates of private and government banks. On an FD of Rs 10 lakh for a year, this difference could mean a difference of around Rs 7,500 in annual interest before tax — no small thing for a retiree.
FD Insurance: Your money is protected up to Rs 5 lakh
One important thing that depositors often ignore is insurance coverage. All bank deposits are insured up to Rs 5 lakh per customer of each bank under the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly owned subsidiary of the Reserve Bank of India.
This limit of Rs 5 lakh includes the principal amount and accumulated interest. If you have more than Rs 5 lakh to invest, it would be wise to divide the deposit among several banks or keep the deposits in different banks to maximize the insurance coverage.
How should senior citizens invest in FD now?
Even though the rates have come down from their peak, FD still remains a preferred option for retirees as it provides predictability of income and capital safety. Here are some things to keep in mind:
Compare rates carefully depending on tenure
- The highest rate is usually given for a specific tenure (e.g. 444 days or 555 days). Do not assume that returns are the same in all tenures.
- Check penalty for withdrawing money before maturity
- Some banks charge a penalty of 0.5% to 1% for breaking FD before maturity.
- Consider the option of paying interest monthly
- Senior citizens who want regular income can choose the option of monthly and quarterly payments.
take care of taxes
- FD interest is fully taxable. If the total income is less than the taxable limit, submit Form 15H to avoid TDS deduction.
- Don’t blindly follow the rates
- While private banks are offering higher returns, depositors should gauge their comfort level and choose from a variety of banks.
- Avoid depositing more amount than the insurance limit in a single bank