FD Interest Rate – Even after many major banks have slashed their fixed deposit (FD) interest rates following the Reserve Bank of India’s (RBI) recent repo rate cut, there’s one bank that’s still holding strong and offering great returns, especially for senior citizens. We’re talking about Utkarsh Small Finance Bank, which continues to offer up to 8.75 percent interest on FDs for senior citizens—a rare find in today’s low-rate environment.
Why are FD rates falling?
On April 9, 2025, the RBI reduced the repo rate by 25 basis points in its bi-monthly policy meeting. The repo rate is the rate at which the central bank lends money to commercial banks. When this rate drops, it becomes cheaper for banks to borrow funds. As a result, banks often reduce the interest rates they offer on loans as well as fixed deposits.
This move was aimed at injecting more liquidity into the economy and encouraging spending and investment. However, for conservative investors—especially retirees who rely on FD income—this means lower returns and fewer low-risk options.
Big banks follow the trend
Soon after the RBI announcement, many large commercial banks like State Bank of India (SBI), HDFC Bank, ICICI Bank, Federal Bank, and Yes Bank revised their FD interest rates downwards. Both regular and senior citizen customers were affected. So if you’re someone who has always trusted big banks for FDs, it might be a bit disappointing to see your returns go down.
Utkarsh Small Finance Bank stands out
While the major players are pulling back, Utkarsh Small Finance Bank has become a bright spot for FD investors. As of May 5, 2025, the bank is offering interest rates ranging from 4 percent to 8.25 percent for regular customers and 4.5 percent to 8.75 percent for senior citizens. The highest rate of 8.75 percent is available for a tenure of two to three years and only applies to deposits below three crore rupees.
This is a great opportunity for senior citizens who want to lock in higher returns in a time when most banks are offering much less. Even regular customers can benefit from the relatively attractive interest rates offered by Utkarsh, especially if they’re planning a medium-term investment.
Things to keep in mind
Before jumping in, there are a few important things you should know. Like most banks, Utkarsh does have some rules around premature withdrawals. If you decide to break your FD before maturity, you’ll face a penalty of one percent. That means your return will be reduced by 1 percent from either the original agreed-upon rate or the rate applicable on the day of deposit—whichever is lower. But there’s a small exception. If you withdraw the FD within the first seven days, no penalty applies.
Is it safe to invest in a Small Finance Bank?
That’s a question many people ask when they see these smaller banks offering higher rates. Small Finance Banks (SFBs) are regulated by the RBI, just like the bigger commercial banks. So they are not fly-by-night operations. Also, all deposits up to five lakh rupees are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). This insurance is the same across all scheduled commercial banks, including SFBs.
So while they may be relatively new in the financial landscape, SFBs are legitimate and can be a safe place to park your money, especially if you stay within the insured limit.
What makes Utkarsh a smart choice right now?
With the current interest rate environment trending downward, finding FDs that offer close to 9 percent returns is becoming increasingly rare. Utkarsh Small Finance Bank is providing a strong option for those who want stability and better returns without venturing into risky investments.
For senior citizens in particular, this could be a smart move. If you’re someone looking to secure a steady income post-retirement, locking in an FD at 8.75 percent for two to three years could help cushion against the impacts of inflation and low returns elsewhere.
If you’ve been hunting for decent FD interest rates and feel disappointed by the recent cuts by major banks, Utkarsh Small Finance Bank might just be worth considering. Just make sure to weigh the pros and cons, like the premature withdrawal penalty and deposit insurance limits. For investors who prefer a safe and predictable income, this could be one of the better FD options currently available in the market.
