Fixed deposit in Feb: IndusInd, Ujjivan SFB & 5 other banks cut/hike rates

Stock market crash has renewed focus on fixed deposits, which remain a preferred investment option

BSE Sensex and Nifty50, India's equity benchmark indices, fell sharply on Friday. The BSE Sensex dropped below 73,600, while the Nifty50 slipped under 22,250. The fall has renewed focus on fixed deposits, which remain a preferred investment option, particularly for senior citizens who rely on them for a steady post-retirement income.

 

Fixed deposit rate revisions following RBI's repo rate cut

 

Following the Reserve Bank of India’s (RBI) repo rate cut earlier this month, several banks have revised their fixed deposit interest rates. Among them is IndusInd Bank, which has adjusted its rates from February 24, 2025.

 

The highest rate for general citizens is now 7.75%, down from 7.99%.

 

Senior citizens will receive up to 8.25%, reduced from 8.49%.

 

Six other banks have also revised their fixed deposit rates for both general and senior citizens in February 2025.

 

Ujjivan Small Finance Bank  

Effective February 21, 2025, interest rates range from 4.25% to 8.75% for senior citizens and 3.75% to 8.25% for general citizens.  

The highest rate of 8.75% is available for deposits of 18 months.  

Under the Platina Fixed Deposit scheme (12 to 18 months), all customers can earn 8.45% interest.

 

DCB Bank  

From February 14, 2025, senior citizens earn 8.25% on deposits of over 12 months up to 12 months and 10 days.  

Deposits of 19 to 20 months now offer an 8.55% interest rate.  

The bank provides 8% on deposits of 700 days to 26 months and up to 8.35% for 37 to 38 months.  

A 61-month deposit earns 8.15%.

 

Karnataka Bank  

From February 18, 2025, the bank offers 8% on deposits of 401 days and 7.75% on deposits of 1 to 2 years for senior citizens.  

These rates apply to deposits below Rs 3 crore.

 

Suryoday Small Finance Bank  

Effective February 1, 2025, senior citizens receive 8.75% interest on deposits of 1 to 3 years.  

A 5-year deposit fetches 9.1%.  

Rates apply to deposits under Rs 3 crore.

 

City Union Bank  

From February 10, 2025, a 333-day deposit offers an 8% interest rate for senior citizens.  

Deposits of 334 to 400 days yield 7.25%.

 

Shivalik Small Finance Bank  

Effective February 18, 2025, senior citizens can earn 9.05% on deposits between 12 months and 1 day to less than 18 months.  

Deposits of 18 to 24 months offer 8.8%, while 24 months and 1 day to 36 months earn 8%.

 

Why fixed deposits remain a popular choice

 

Fixed deposits continue to attract investors, especially during market fluctuations. Adhil Shetty, CEO of BankBazaar, pointed out their role in financial stability. “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. Early withdrawals are allowed, but some may attract penalties. Senior citizens generally benefit from higher interest rates. Additionally, deposits up to Rs 5 lakh, including interest, are insured under the RBI’s deposit insurance scheme.

 

Taxation on FD interest

 

Interest earned on FDs is taxable, with tax deducted at source (TDS) if it exceeds a specified limit. Budget 2025 raised the TDS threshold:

 

General citizens: Rs 50,000 (previously Rs 40,000)

Senior citizens: Rs 1 lakh

 

For example, Rekha, a 32-year-old resident of Gurgaon, earns Rs 75,000 in annual FD interest. Since the TDS threshold for general citizens is Rs 50,000, tax is deducted at 10% on the excess amount of Rs 25,000, resulting in a Rs 2,500 deduction.

 

The Rs 75,000 interest is added to her taxable income. If her total income is below Rs 2.5 lakh, she owes no additional tax. To avoid TDS, she can submit Form 15G at the start of the financial year, declaring that her income is below the taxable limit.