In recent months, many banks have cut their fixed deposit (FD) interest rates in the wake of the RBI’s 100 basis points cut in the repo rate since February 2025. Despite this, some banks are still offering attractive interest rates on fixed deposits for senior citizens. These banks are small finance banks, which always have an edge over their large peers in terms of rate offerings. However, investors must remember that large banks generate more trust among customers due to their established and widespread presence as compared to small finance banks.
Talking about small finance banks like Suryoday Small Finance Bank and Utkarsh Small Finance Bank, these banks are offering attractive interest rates of 8.80% and 8.70%, respectively, for senior citizens. Apart from this, many other public and private banks are also giving good interest in FD to senior citizens.
Also read: Post Office schemes vs bank FDs: THESE govt schemes offer higher interest than most major banks – Check rates
RBI repo rate cuts impact on bank FDs
So far in the financial year 2025, the Reserve Bank has cut the repo rate by a total of 100 bps. In the monetary policy meeting of June 2025, the RBI had made a big cut of 50 bps in one stroke, while in February and April, 25-25 basis points were cut.
The repo rate is the rate at which the RBI lends to banks. When the RBI reduces the repo rate, banks start getting cheaper loans. The direct effect of this is that banks reduce interest rates on FDs because now they do not need to pay more interest to raise funds.
For this reason, many banks have reduced FD interest rates in recent months. However, the good thing is that most banks are still offering good interest rates for senior citizens.
Tax relief on FDs
In the budget for the financial year 2025-26, senior citizens have also been given tax relief. Now, from April 1, 2025, if a senior citizen’s FD interest income is less than Rs 1 lakh in a year, the bank will not deduct TDS on it. Earlier, this limit was Rs 50,000.
Also, if a senior citizen’s total annual income is less than Rs 12 lakh, they can avoid TDS altogether by filing Form 15H with the bank even if their interest is more than Rs 1 lakh.
» Read More
