If you’re looking to grow your savings securely, Fixed Deposits (FDs) remain a preferred choice for many Indian investors. As of April 2025, several banks are offering highly competitive interest rates on 1-year FDs, making this the perfect time to park your funds in a safe, stable investment.
Highest Interest on 1-Year FD
| Bank | 1-Year FD Rate (General) | 1-Year FD Rate (Senior Citizens) |
|---|---|---|
| Suryoday Small Finance Bank | 8.25% | 8.75% |
| Ujjivan Small Finance Bank | 8.10% | 8.60% |
| Jana Small Finance Bank | 7.50% | 8.00% |
| RBL Bank | 7.50% | 8.00% |
| IndusInd Bank | 7.75% | 8.25% |
| HDFC Bank | 6.60% | 7.10% |
| ICICI Bank | 6.70% | 7.20% |
| State Bank of India (SBI) | 6.70% | 7.20% |
With interest rates peaking in April 2025, now is a great time to lock in a 1-year FD with a trusted bank. Whether you’re a conservative investor or just parking surplus cash, 1-year FDs provide a safe, predictable, and rewarding investment route. Always compare rates, check the credibility of the bank, and understand the fine print before investing.
What is a Fixed Deposit (FD)?
A Fixed Deposit (FD) is a popular savings instrument offered by banks and non-banking financial companies (NBFCs). You deposit a lump sum amount for a fixed tenure and earn a predetermined rate of interest on it. At maturity, you receive the principal along with the interest earned.
FDs are considered one of the safest investment options, especially for conservative investors looking for stable returns.
see also: Post Office RD: Deposit ₹1,500 Every Month, Get Over ₹1 Lakh on Maturity
Factors That Influence FD Interest Rates
Several macro and microeconomic factors play a role in determining FD interest rates:
1. Repo Rate
The Reserve Bank of India’s (RBI) repo rate is a key driver. As of April 2025, the repo rate stands at 6.00%, which allows banks some headroom to offer higher deposit rates.
2. Bank’s Liquidity Position
Banks that need funds for lending or expansion may offer higher FD rates to attract more deposits.
3. Inflation
Higher inflation often prompts banks to offer better interest rates to stay attractive, as real returns need to beat inflation.
Why Choose a 1-Year FD?
- Short-Term Commitment: Suitable for those who need funds after 12 months.
- Stable Returns: Unlike mutual funds or stock markets, FDs offer guaranteed returns.
- Low Risk: FDs are insured up to ₹5 lakh under the DICGC scheme.
Types of Banks Offering High FD Rates
1. Small Finance Banks
Banks like Suryoday, Ujjivan, and Jana Small Finance Bank offer the highest rates (up to 8.25%). These banks are RBI-regulated but may carry slightly higher risk compared to public sector banks.
2. Private Sector Banks
Banks such as IndusInd Bank and RBL Bank offer competitive rates with relatively higher service quality and digital infrastructure.
3. Public Sector Banks
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While banks like SBI and Bank of Baroda offer slightly lower rates (around 6.70%), they enjoy higher customer trust and safety perception.
How to Choose the Best 1-Year FD
Step 1: Compare Interest Rates
Use the comparison table above to check the highest rates. If maximizing returns is your priority, small finance banks can be a good option.
Step 2: Evaluate the Safety of the Bank
Always verify if the bank is covered under DICGC insurance, which protects deposits up to ₹5 lakh.
Step 3: Check Premature Withdrawal Rules
Some banks charge a penalty or lower interest rate if you break the FD early. Read the fine print carefully.
Step 4: Consider Senior Citizen Benefits
Most banks offer 0.25% to 0.75% extra for senior citizens. For example, Suryoday Small Finance Bank offers 8.75% for those aged 60 and above.
Taxation on FD Interest
- TDS (Tax Deducted at Source) applies if interest exceeds ₹40,000 (₹50,000 for senior citizens).
- You can submit Form 15G/15H to avoid TDS if your total income is below taxable limits.
- Interest is taxed as per your income tax slab.
Who Should Invest in a 1-Year FD?
- Salaried Individuals: Great for saving emergency funds or short-term goals.
- Senior Citizens: Can benefit from higher interest and stable returns.
- Low-Risk Investors: Ideal for those avoiding market volatility.
- Parents & Guardians: Safe option for building funds for school or college fees in the short term.
Pro Tips for Maximizing FD Returns
- Use FD Laddering: Divide your funds across multiple FDs with different maturity dates to maintain liquidity.
- Choose Cumulative FDs: For reinvestment and compound interest benefits.
- Avoid Premature Withdrawal: Unless absolutely necessary, let the FD run its full course to avoid penalties.
see also: Post Office Scheme: Save ₹5,000 Monthly and Get ₹8 Lakh – Is It Really Possible?
Highest Interest on 1-Year FD FAQs
Q1: Are small finance banks safe for FD investments?
Yes, most are RBI-regulated and covered under DICGC. However, do assess their financial health before investing.
Q2: Can I renew my FD after 1 year?
Yes. Most banks offer auto-renewal facilities or allow manual reinvestment at the prevailing rate.
Q3: How is the interest paid?
You can opt for monthly, quarterly, or cumulative payout (paid at maturity).
Q4: What documents are needed to open an FD?
PAN card, Aadhaar card, and a bank account. Senior citizens may need age proof for higher rates.
Q5: Can I open an FD online?
Yes, most banks offer digital FD services via net banking or mobile apps.
