Senior citizens have hit the jackpot! These banks have increased their interest rates on fixed deposits, offering up to 7.75% returns..
Fixed deposit (FD) investors have seen softening interest rates over the past year. Following the Reserve Bank of India's 125 basis point cut in the repo rate in 2025, banks and non-bank lenders (NBFCs) gradually reduced deposit rates over varying periods. This has been a cause for concern for many senior citizens who rely on FD income for monthly expenses. Nevertheless, despite the rate cuts, many banks are still offering good returns of up to 7.75% for senior citizens in February 2026. Let us tell you where senior citizens can still earn higher interest.
Top 5 Private Sector Banks Offering the Highest FD Rates for Senior Citizens
Banks
Highest FD Rates for Senior Citizens
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 currently offers the highest rate for senior citizens at 7.75%. Bandhan Bank and RBL Bank are close behind at 7.70%. Generally, private banks are offering a significant premium over PSU banks in the current cycle.
Top 5 Public Sector Banks Offering the Highest FD Rates for Senior Citizens
Banks
Highest FD Rates for Senior Citizens
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 public sector banks. On a one-year FD of Rs 10 lakh, this difference could mean a difference of around Rs 7,500 in annual interest before tax—no small thing for retirees.
FD Insurance: Your money is safe up to Rs 5 lakh
An important factor that depositors often overlook is insurance coverage. All bank deposits are insured up to Rs 5 lakh for every customer of every bank under the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of the Reserve Bank of India.
This Rs 5 lakh limit includes the principal amount and accrued interest. If you have more than Rs 5 lakh to invest, it may be wise to split the deposit across multiple banks or keep it in different banks to maximize insurance coverage.
How should senior citizens invest in FDs now?
Even though rates have fallen from their peak, FDs remain a preferred option for retirees because they offer predictable income and capital protection. Here are a few things to keep in mind:
Compare rates carefully by tenure.
The highest rates are usually offered for a specific tenure (e.g., 444 days or 555 days). Don't assume that all tenures offer the same returns.
Check the premature withdrawal penalty.
Some banks charge a 0.5% or 1% penalty for breaking an FD before maturity.
Consider the monthly interest payment option.
Senior citizens who require a regular income can choose monthly or quarterly payment options.
Keep Taxes in Mind
FD interest is fully taxable. If the total income is below the taxable limit, submit Form 15H to avoid TDS deductions.
Don't blindly chase rates.
While private banks are offering higher returns, depositors should assess their comfort level and choose from a variety of banks.
Avoid depositing large amounts beyond the insurance limit with a single bank.
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