Best FD rates February 2025: 10 private banks offer 7.5%+ interest

The recent stock market decline has turned investor attention back to safer options such as fixed deposits (FDs). Benchmark indices, SENSEX and NIFTY50, have each dropped more than 3% so far in 2025, prompting many to reconsider low-risk investments.

 

Stock market fluctuations are common, but FDs offer stability, particularly in times of volatility. These instruments provide assured returns at predetermined rates, offering a buffer against stock market losses.

 

Why fixed deposits remain important

 

Adhil Shetty, CEO of BankBazaar, explained that fixed deposits serve as a stable investment option during market downturns. “Fixed deposits are low-risk instruments compared to stocks and other equity investments. FD schemes offer guaranteed returns, bringing stability to a portfolio,” said Shetty.

 

 

He noted that FDs help investors meet short-term financial goals without exposing them to market risks. “If you need money for travel in six months or for your child’s school admission next year, FDs ensure your funds remain intact and earn assured returns,” he added.

 

Banks and non-banking financial companies (NBFCs) offer FDs with tenures ranging from six months to ten years, with varying interest rates based on the amount and duration. Investors can withdraw funds before maturity in emergencies, though some withdrawals may attract penalties.

 

Senior citizens often benefit from higher FD interest rates, while depositors also receive security under the RBI’s deposit insurance scheme. Deposits up to Rs 5 lakh, including interest, are insured, ensuring customers recover their money even if a bank faces financial difficulties.

 

Taxation on fixed deposit interest

 

Interest earned on FDs is taxable, with tax deducted at source (TDS) if it crosses a specified limit. Budget 2025 raised the TDS threshold from Rs 40,000 to Rs 50,000 for general citizens and to Rs 1 lakh for senior citizens.

 

For example, Ashutosh, a 32-year-old resident of Gorakhpur, earns Rs 75,000 in annual FD interest. Since the TDS threshold for general citizens is Rs 50,000, a 10% deduction applies to the excess amount, meaning Rs 7,500 is deducted.

 

The Rs 75,000 interest is added to Ashutosh’s taxable income. If his total income is below Rs 2.5 lakh, no additional tax is required. To avoid TDS deductions, he can submit Form 15G at the start of the financial year, declaring that his income is below the taxable limit.

 

Banks offering highest FD rates

 

With interest rates expected to change, here are 10 private banks currently offering the highest fixed deposit rates, according to data compiled by PaisaBazaar:

 

Private Sector Banks:

1. Bandhan Bank  

Highest slab: 8.05% (1 year)  

Interest rates:  

1-year: 8.05%  

3-year: 7.25%  

5-year: 5.85%

 

2. CSB Bank  

Highest slab: 8.00% (501 days)  

Interest rates:  

1-year: 5.00%  

3-year: 5.75%  

5-year: 5.75%

 

3. DCB Bank  

Highest slab: 8.05% (19 months to 20 months)  

Interest rates:  

1-year: 7.10%  

3-year: 7.50%  

5-year: 7.40%

 

4. IDFC FIRST Bank  

Highest slab: 7.90% (400 days to 500 days)  

Interest rates:  

1-year: 6.50%  

3-year: 6.80%  

5-year: 6.75%

 

5. IndusInd Bank  

Highest slab: 7.99% (1 year 5 months to less than 1 year 6 months)  

Interest rates:  

1-year: 7.75%  

3-year: 7.25%  

5-year: 7.25%

 

6. Karur Vysya Bank  

Highest slab: 7.60% (760 days - Special Deposit)  

Interest rates:  

1-year: 7.00%  

3-year: 7.00%  

5-year: 7.00%

 

7. RBL Bank  

Highest slab: 8.00% (500 days)  

Interest rates:  

1-year: 7.50%  

3-year: 7.50%  

5-year: 7.10%

 

8. SBM Bank India  

Highest slab: 8.25% (Above 18 months to less than 2 years 3 days)  

Interest rates:  

1-year: 7.05%  

3-year: 7.30%  

5-year: 7.75%

 

9. Tamilnad Mercantile Bank  

Highest slab: 7.60% (300 days - TMB300)  

Interest rates:  

1-year: 7.00%  

3-year: 6.50%  

5-year: 6.50%

 

10. YES Bank  

Highest slab: 8.00% (18 months)  

Interest rates:  

1-year: 7.75%  

3-year: 7.25%  

5-year: 7.25%

 

Impact of RBI rate cut on fixed deposits

 

The Reserve Bank of India (RBI) has lowered the repo rate by 25 basis points to 6.25%, which is expected to lead to a drop in FD interest rates. The repo rate, which determines the cost at which commercial banks borrow from the central bank, influences lending and deposit rates across the economy.

 

With banks likely to adjust FD rates downward, returns from fixed deposits may decline in the coming months. Hence, it's best to lock in the interest rates now.