FD rates touch 8% at Small Finance Banks as returns outpace big lenders

Fixed deposits are back: Where savers can earn up to 8% in 2026

For conservative savers bruised by equity volatility and still wary of long-term market swings, fixed deposits (FDs) are regaining relevance in early 2026—especially at small finance banks that continue to offer rates well above those available at large public and private sector lenders.

 

According to data compiled by Stable Money, several small finance banks are currently offering FD rates as high as 8%, making them attractive low-risk saving options for investors prioritising certainty and predictable income.

 

Where savers can earn the highest FD returns

 

At the top of the rate table are Suryoday Small Finance Bank and Shivalik Small Finance Bank, both offering 8% on their highest FD slabs. Suryoday’s top rate applies to a five-year tenure, while Shivalik offers the same return on a much shorter 1 year 10 months deposit. 

Highest Fixed Deposit Rates – Small Finance Banks (January 2026). 

 

 

Rates reflect the highest available slabs and are subject to revision by banks. Actual returns may vary for callable FDs, bulk deposits, NRIs, and special schemes.

Other competitive options include Jana Small Finance Bank, which offers 7.77% for a three-year FD, and Utkarsh Small Finance Bank, where senior citizens can earn up to 8% on a three-year tenure, compared to 7.5% for regular investors.

 

Mid-range tenures are also rewarding. Slice Small Finance Bank is offering 7.75% for an 18-month deposit, while Ujjivan Small Finance Bank provides 7.45% for regular investors and 7.95% for senior citizens on a two-year FD.

 

Meanwhile, AU Small Finance Bank, one of the larger players in the segment, offers 7.1% for regular citizens and 7.6% for seniors on deposits between 30 months and 36 months.

 

What this means for everyday investors

 

"Small Finance Banks currently offer some of the highest fixed deposit rates in the market—often 1 to 1.5 percentage points higher than traditional banks. These banks are fully regulated by the Reserve Bank of India and were created to expand access to formal financial infrastructure at the grassroots level. Importantly, deposits are insured up to ₹5 lakh under the Deposit Insurance and Credit Guarantee Corporation (a wholly owned subsidiary of the RBI), providing a strong layer of safety for investors," said Saurabh Jain, Co-founder & CEO, Stable Money, a fixed income investment platform. 

 

For a saver investing ₹5 lakh, the difference between a 6.5% FD and an 8% FD over three years can translate into ₹25,000–₹30,000 more in interest, without taking on market risk. This is particularly meaningful for retirees, near-retirees, and households building emergency or goal-based savings.

 

Senior citizens stand to benefit even more, with most banks offering a 0.5% additional rate, helping counter inflation and rising living costs.

 

Points to keep in mind before locking in

 

Deposit insurance: FDs in small finance banks are covered by DICGC insurance up to ₹5 lakh per depositor per bank, including principal and interest.

 

Callable deposits: Some high-rate FDs may be callable, meaning the bank can redeem them early under certain conditions.

 

Liquidity needs: Longer tenures offer higher rates but reduce flexibility; matching tenure to cash-flow needs is critical. 

Tax: Interest earned on your bank fixed deposits (FDs) is fully taxable under Indian law and must be reported under “Income from Other Sources” when you file your income tax return. Any FD interest you earn is added to your total taxable income and taxed according to your income tax slab rate for the year. In addition, banks typically deduct TDS (Tax Deducted at Source) at 10% under Section 194A if your annual FD interest exceeds the threshold (usually ₹50,000 for regular taxpayers and ₹1 lakh for senior citizens), though exemptions can apply if you submit Form 15G/15H and your overall tax liability is zero. Senior citizens can also claim a deduction of up to ₹50,000 on interest income under Section 80TTB (available under the old tax regime), potentially reducing their tax burden on FD earnings.