Fixed Deposits (FDs) are one of the safest and most popular investment options for Indian investors, offering guaranteed returns and capital protection. But which bank offers the highest FD returns—Government, Private, or Small Finance Bank (SFB)? This is a question on every smart investor’s mind, especially when interest rates keep fluctuating.
In this comprehensive guide, we’ll break down the latest FD interest rates in India (2025) across these three banking categories. We’ll also provide practical advice on which option might best suit you based on your risk appetite, financial goals, and investment horizon.
Who is Giving the Highest Return on FD in 2025?
| Feature | Public Sector Banks (Government) | Private Sector Banks | Small Finance Banks (SFBs) |
|---|---|---|---|
| Highest FD Rate (General Public) | 7.95% p.a. (Punjab & Sind Bank, Bank of Maharashtra) | 8.75% p.a. (SBM Bank) | 9.50% p.a. (Unity Small Finance Bank) |
| Senior Citizen Special Rates | Up to 7.95% p.a. | Up to 8.75% p.a. | Up to 9.50% p.a. |
| DICGC Insurance Cover | ₹5 lakh | ₹5 lakh | ₹5 lakh |
| Risk Level | Very Low | Low to Medium | Slightly Higher |
In 2025, Small Finance Banks are clearly leading the race by offering the highest FD interest rates—up to 9.50% per annum. However, Public Sector Banks still hold strong appeal for ultra-safe investors, while Private Banks offer a middle ground with decent rates and flexibility.
Choosing the right FD option depends on your financial goals, risk appetite, and investment period. A balanced strategy often involves spreading your investments across different banks to optimize returns and minimize risks.
Understanding FD Interest Rates: Context for 2025
In 2024, the Reserve Bank of India (RBI) maintained a tight monetary policy to control inflation, keeping the repo rate steady. As a result, banks across India started offering competitive FD rates to attract depositors. While public sector banks remained conservative, private sector and small finance banks have gone aggressive with interest rates.
FDs continue to be a preferred low-risk instrument, especially for risk-averse investors, retirees, and those looking for stable income. Let’s dive deeper into what each bank category offers.
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Public Sector Banks: Stability with Moderate Returns
Public Sector Banks (PSBs) like State Bank of India (SBI), Punjab National Bank (PNB), and Bank of Maharashtra are majority-owned by the government. They offer safety, trustworthiness, and moderate interest rates.
Current FD Rates (March 2025)
| Bank | Highest FD Rate | Tenure |
|---|---|---|
| SBI | 7.75% p.a. (Amrit Vrishti FD) | 444 days |
| Punjab & Sind Bank | 7.95% p.a. | 555 days |
| Bank of Maharashtra | 7.95% p.a. | 366 days |
Pros & Cons
| Pros | Cons |
|---|---|
| Government-backed safety | Lower returns compared to private & SFBs |
| Senior citizen special rates | Less flexibility in rate negotiation |
| Wide network of branches | Conservative interest rates |
Private Sector Banks: Competitive Returns, Higher Flexibility
Private banks such as HDFC Bank, ICICI Bank, Bandhan Bank, and SBM Bank offer slightly better rates to attract more customers. They balance safety and returns, catering to both retail and HNI investors.
Current FD Rates (March 2025)
| Bank | Highest FD Rate | Tenure |
|---|---|---|
| SBM Bank | 8.75% p.a. | 18 months to < 2 years 3 days |
| Bandhan Bank | 8.55% p.a. | 1 year |
| RBL Bank | 8.50% p.a. | 500 days |
Pros & Cons
| Pros | Cons |
|---|---|
| Higher FD rates than PSBs | Slightly higher risk profile |
| Faster digital banking services | Less stability during financial stress |
| Senior citizen & special deposit schemes | May require larger deposits for special rates |
Small Finance Banks (SFBs): The Highest FD Returns in 2025
Small Finance Banks like Unity SFB, Suryoday SFB, and North East SFB are emerging champions offering the highest FD rates in India. Designed to cater to underserved segments, these banks compete fiercely for deposits.
Current FD Rates (March 2025)
| Bank | Highest FD Rate | Tenure |
|---|---|---|
| Unity Small Finance Bank | 9.50% p.a. | 1001 days |
| North East Small Finance Bank | 9.00% p.a. | 546 to 1111 days |
| Suryoday Small Finance Bank | 9.10% p.a. | 5 years |
Pros & Cons
| Pros | Cons |
|---|---|
| Highest FD returns (up to 9.50% p.a.) | Slightly higher risk due to smaller asset base |
| DICGC insurance cover of ₹5 lakh | Limited branch network |
| Attractive rates for senior citizens | Less known compared to established banks |
How to Choose the Best FD Option
Step 1: Assess Your Risk Appetite
If absolute safety is your priority, stick to Public Sector Banks. If you’re comfortable with slightly higher risk for better returns, explore Private and Small Finance Banks.
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Step 2: Determine Your Investment Horizon
- Short-term (1-2 years): SBM Bank, Bandhan Bank, and SBI’s special FDs offer attractive options.
- Medium to Long-term (3+ years): Unity SFB and Suryoday SFB offer highest returns.
Step 3: Consider Senior Citizen Benefits
Most banks offer 0.25% to 0.50% extra for senior citizens. Always compare special senior citizen schemes.
Step 4: Check Bank Credibility
While all banks are regulated by RBI, smaller banks might carry operational risks. Always check CRISIL ratings, past performance, and customer reviews.
Step 5: Diversify Your Deposits
Spread your FD investments across multiple banks and tenures to balance risk and liquidity.
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Highest Return on FD in 2025 FAQs
1. Are FDs in Small Finance Banks safe?
Yes. Deposits up to ₹5 lakh are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). However, beyond that, evaluate the bank’s credibility.
2. Can I prematurely withdraw my FD?
Yes, but it often attracts a penalty of 0.5%-1% on the interest rate.
3. Should senior citizens prefer Small Finance Banks for FDs?
If maximizing returns is the goal and you can tolerate slightly higher risk, SFBs are excellent options. But always stay within the ₹5 lakh insurance limit per bank.
4. Are FD interest earnings taxable?
Yes, FD interest is fully taxable as per your income slab. Banks deduct TDS at 10% if interest exceeds ₹40,000 (₹50,000 for senior citizens).
