Small finance banks pay up to 8.5% on FDs: Where can you get highest rates?

If you are looking for predictable returns without taking on equity-market volatility, fixed deposits are offering some attractive rates—but the highest returns are increasingly coming from small finance banks rather than India’s largest lenders.

As of August 25, Suryoday Small Finance Bank is offering the highest rate in the data at 8.25% for regular customers and 8.50% for senior citizens, with the peak rate available on five-year deposits.

Other small finance banks are also offering rates of 8% or more.

As of this week, Suryoday Small Finance Bank is offering rates of up to 8.25% for general citizens and 8.50% for senior citizens, while Shivalik Small Finance Bank offers up to 8.00% for general citizens and 8.50% for senior citizens.

Jana Small Finance Bank offers up to 8.00% for general citizens and 8.30% for senior citizens, while Ujjivan Small Finance Bank offers up to 7.80% and 8.30%, respectively. Utkarsh Small Finance Bank is offering up to 8.10% for general citizens and 8.25% for senior citizens, while Unity Small Finance Bank offers up to 8.00% for general citizens and 8.50% for senior citizens.

“The fixed deposit landscape continues to remain competitive across select banks and tenures, with small finance banks offering some of the higher rates currently available to investors. Suryoday Small Finance Bank is offering rates of up to 8.25% for general citizens and 8.50% for senior citizens, while Shivalik Small Finance Bank offers up to 8.00% for general citizens and 8.50% for senior citizens. Jana Small Finance Bank offers up to 8.00% for general citizens and 8.30% for senior citizens, while Ujjivan Small Finance Bank offers up to 7.80% and 8.30%, respectively. Utkarsh Small Finance Bank is offering up to 8.10% for general citizens and 8.25% for senior citizens, while Unity Small Finance Bank offers up to 8.00% for general citizens and 8.50% for senior citizens,” said Saurabh Jain, Co-founder & CEO, Stable Money.

FD Rates Up to 8.5%: These Small Finance Banks Are Paying the Most, Source: Stable money

The attraction becomes clearer when these rates are compared with larger banks. In the supplied data, SBI’s highest regular rate is 6.45%, while HDFC Bank and ICICI Bank offer a maximum of 6.50%. Axis Bank’s maximum regular rate is also 6.50%.

That means the gap between the highest small-finance-bank rate and the largest banks can be nearly 1.75 percentage points for regular depositors.

The tenure matters as much as the rate

The headline rate alone should not determine where you put your money.

For example, Suryoday’s 8.25% is available for five years, while Utkarsh offers 8.10% for 666 days. Shivalik’s 8% rate is available for roughly two years, while Unity’s 8% rate is available for 501 days.

For someone who does not want to lock money away for five years, therefore, a slightly lower rate over a shorter period may be more useful.

The supplied data also show that some banks offer considerably different rates across tenures. Jana Small Finance Bank, for instance, offers 8% for three years but 7% for one year. Ujjivan offers 7.80% for two years compared with 7.25% for one year.

What about senior citizens?

Senior citizens continue to get a meaningful premium at several banks.

Suryoday, Shivalik and Unity offer as much as 8.50%, the highest senior-citizen rate in the supplied data. Utkarsh offers 8.25%, while Jana and Ujjivan offer up to 8.30%.

For a senior citizen investing ₹10 lakh, an 8.50% simple annual interest rate translates to roughly ₹85,000 of interest in a year before tax, although actual maturity proceeds will depend on the tenure and compounding frequency.

Don’t chase the highest rate blindly

The higher interest rate comes with an important consideration: bank deposits are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) only up to ₹5 lakh per depositor per bank, including principal and interest.

That makes diversification particularly relevant when investing larger sums.

As Saurabh Jain, Co-founder & CEO, Stable Money, said, “Investors can consider spreading their deposits across multiple institutions and tenures while keeping the ₹5 lakh DICGC insurance coverage limit per bank in mind.” A staggered approach can help investors make the most of prevailing rates while maintaining the stability associated with fixed-income investments, Jain explained.