Retirement win: Banks offer senior citizens above 8% fixed deposit rates despite rate cuts

When planning for a secure and fulfilling retirement, making informed decisions about where to invest your savings is crucial. For senior citizens in India, bank fixed deposits (FDs) are considered a reliable and beneficial option. Recently, there has been a series of interest rate reductions on fixed deposits offered by various banks. 

In May 2025, senior citizens in India are benefiting from favourable fixed deposit (FD) interest rates, despite the Reserve Bank of India's recent repo rate cuts. Following these cuts, numerous banks, including Punjab National Bank and State Bank of India, adjusted their FD rates. However, rates for senior citizens remain attractive, hovering around 8.25% in many banks. Several financial institutions are offering competitive rates for FDs below ₹3 crore, particularly for short-term tenures, providing an appealing choice for retirees looking to secure their savings.

Following the announcement of a repo rate cut by the Reserve Bank of India (RBI) in April, many banks have adjusted their FD interest rates. Despite the anticipation of further rate cuts in the near future, the interest rates for senior citizens on FDs remain relatively high, averaging around 8.25% at many banks.

Numerous banks now offer competitive interest rates on FDs below Rs 3 crore and for shorter terms to senior citizens. Additionally, senior citizens can benefit from a higher threshold for TDS deduction on FD interest, which became effective on April 1, 2025.

Small finance banks have emerged as leaders in offering high FD rates to senior citizens, with institutions like Suryoday Small Finance Bank and Unity Small Finance Bank providing rates from 8.65% to 9.10% for tenures slightly exceeding five years. 

Private banks such as YES Bank and SBM Bank maintain rates around 8.25%, whereas public sector banks like State Bank of India offer up to 7.5%. The flexibility of monthly, quarterly, or cumulative interest payments makes these options adaptable to individual financial strategies. 

Among private sector banks, SBM Bank leads with a rate of 8.55%, followed by Bandhan Bank, IndusInd Bank, and RBL Bank, each providing a maximum of 8.25%. In the public sector, the Central Bank of India offers the highest rate at 8.00%, with the Bank of Maharashtra slightly behind at 7.95%. These rates reflect a broader trend of competitive offerings to attract senior citizen deposits amidst fluctuating economic conditions.

TDS on FD investment

The Union Budget 2025 introduced a higher threshold for tax deducted at source (TDS) on interest earned from FDs. Now, TDS will apply only when a senior citizen's interest income surpasses Rs 1 lakh annually per bank, compared to the previous threshold of ₹50,000. This regulatory change aims to enhance the post-tax returns for senior citizens, allowing them to maximise their savings. Senior citizens with total incomes below the taxable limit can avoid TDS by submitting Form 15H, even if their interest income exceeds Rs 1 lakh.