FD rates in India peaked in late 2024 and have drifted lower as the RBI cut the repo rate twice in early 2026. The 7%+ rates that were standard at the big banks 18 months ago are gone — now the 7.0%+ tier mostly belongs to small finance banks and senior-citizen rate cards.
This is a snapshot of where to actually park money in May 2026, with the small print that matters.
What changed in 2026
- RBI cut repo by 50 bps over Feb–Apr 2026. Banks have passed about 25–35 bps through to FD rates so far.
- DICGC insurance is still ₹5 lakh per depositor per bank. That's the cap — open multiple FDs at the same bank and you only get ₹5 lakh covered total.
- TDS threshold for FD interest is ₹40,000 (₹50,000 for seniors) — submit Form 15G/15H if your total income is below the basic exemption, or TDS gets deducted at 10%.
Big private/PSU banks — convenience pick
For most retail savers, the big banks are the default — branch network, online access, instant liquidation, OD against FD. The trade-off is rates 50–100 bps below small finance banks.
May 2026 indicative rates for a 1–2 year FD at the big four:
- SBI: 6.80% (general), 7.30% (senior)
- HDFC Bank: 6.85% (general), 7.35% (senior)
- ICICI Bank: 6.90% (general), 7.40% (senior)
- Axis Bank: 6.85% (general), 7.35% (senior)
Rates change weekly — verify on each bank's official rate page before locking in.
Small finance banks — best yield
Small finance banks (Equitas, Ujjivan, AU, Suryoday, Jana, Unity, ESAF, Utkarsh) are the rate leaders. They're all DICGC-insured up to ₹5 lakh, and most are publicly listed with audited financials.
May 2026 indicative top rates (2-year tenure, general):
- Suryoday SFB: 8.50%
- Unity SFB: 8.40%
- Jana SFB: 8.35%
- Equitas SFB: 8.10%
- AU SFB: 7.85%
Senior citizens add 0.50–0.75% to these. For a senior parking ₹5 lakh in a 2-year FD at Suryoday, you're looking at ~9.25% — comfortably ahead of any debt mutual fund's recent net-of-expense return.
The risk you take is operational, not credit (since DICGC covers ₹5 lakh). Spread amounts above ₹5 lakh across multiple banks rather than chasing one rate.
Tax-saver FDs (5-year lock-in)
Under section 80C in the old tax regime, you can claim up to ₹1.5 lakh on a 5-year tax-saver FD. Rates are typically 6.5–7.0% at big banks, up to 7.50% at small finance banks for general; 0.50% more for seniors.
If you're in the new tax regime (which is the default and chosen by most salaried earners in 2026), 80C is irrelevant — choose a regular FD with better liquidity instead.
FD vs alternatives in May 2026
| Instrument |
Yield (general) |
Lock-in |
Risk |
| Big bank FD (1–2 yr) |
6.8–6.9% |
1–2 yr (premature: −1%) |
Very low |
| Small finance bank FD |
7.8–8.5% |
1–2 yr (premature: −1%) |
Low (DICGC ₹5L) |
| RBI Floating Rate Bond |
8.05% |
7 yr |
Sovereign |
| Debt mutual fund (short duration) |
7.0–7.5% net |
None |
Low–medium |
| Liquid fund |
6.5–7.0% net |
None |
Low |
FAQ
Are small finance bank FDs safe?
For amounts up to ₹5 lakh per bank, yes — DICGC insurance is identical to that of large banks. Beyond ₹5 lakh, you take credit risk. Spread the deposits across banks.
Should I break my FD if rates rise?
Most banks charge 1% premature withdrawal penalty. Compute: (new rate − old rate − 1%) × remaining tenure × principal. If the math is positive, break it.
Is monthly interest better than cumulative?
Cumulative compounds quarterly inside the FD and pays at maturity. Monthly payout is the same effective rate, just sliced. Choose monthly only if you actually need the cash flow.
Where to go next
For related guides see Best high-yield savings accounts for 2026, Best CD rates for 2026, and How to buy treasury bills in 2026.