FD Interest Rates 2026: RBI Holds Repo Rate, Top Banks Offering Up to 8% for Senior Citizens

RBI holds repo rate steady at 5.25%, providing stability for FD investors. Discover the highest fixed deposit rates for senior citizens

In a decision that brings relief to fixed deposit (FD) investors, particularly senior citizens dependent on interest income, the Reserve Bank of India (RBI) has maintained the key repo rate at 5.25%. This announcement, made following the Monetary Policy Committee (MPC) meeting on February 6, 2026, signals a period of stability, suggesting that banks are unlikely to slash FD interest rates in the immediate future.

For millions of retirees, FDs remain a cornerstone of their investment portfolio, offering predictable returns. The RBI’s pause, under the supervision of Governor Sanjay Malhotra, comes after a 25-basis-point cut in December 2025. While the transmission of past cuts is still ongoing, this hold offers a window for investors to lock in relatively attractive rates before any potential downward revision.

What Does the RBI’s Decision Mean for Your FD?

The central bank’s stance is a double-edged sword. For existing FD investments, the returns are completely protected until maturity; the rate locked in at the time of deposit remains unchanged. However, for those looking to invest new funds or renew maturing deposits, the environment remains competitive but vigilant. A future rate cut cycle, when it begins, would directly impact the interest income on new investments.

Senior citizens, who typically earn an additional 0.25% to 0.75% over standard deposit rates, must act strategically to maximize their earnings in this stable but potentially plateauing interest rate scenario.

Highest FD Interest Rates for Senior Citizens in 2026

While major commercial banks offer security, Small Finance Banks (SFBs) are currently leading the race with the most attractive returns. Here are some of the highest-yielding FD schemes for senior citizens as of February 2026:

Bank Name Highest FD Interest Rate Tenure
Utkarsh Small Finance Bank 8.00% 3 Years
Jana Small Finance Bank 8.00% 2 – 3 Years
Yes Bank 7.75% 36 months – < 60 months
ICICI Bank 7.10% 3 years 1 day – 10 years
Canara Bank 7.00% 555 Days
HDFC Bank 6.95% 21 months – 2 years 11 months

Key Takeaway: SFBs like Utkarsh and Jana are offering the benchmark rate of 8%, making them compelling options for senior citizens willing to park funds for 2-3 years. Traditional giants like ICICI Bank and HDFC Bank offer rates between 6.95% and 7.10% for specific tenures.

Crucial Tax Rules: TDS on Senior Citizen FDs

Understanding the Tax Deducted at Source (TDS) rules is essential for efficient income planning. For senior citizens, the rule is:

· TDS Threshold: Banks will deduct TDS at 10% only if the total interest income from all FDs in a single bank branch exceeds ₹1 lakh in a financial year. It is not an additional tax but an advance payment that can be adjusted against your final tax liability when filing the Income Tax Return (ITR).

How to Avoid TDS: Submit Form 15H

Eligible senior citizens can prevent TDS deduction entirely by submitting Form 15H to their bank.

· Eligibility: You can submit Form 15H if your total income (including interest) is below the taxable limit for the financial year.
· Important Note: This form must be submitted at the start of every financial year to be effective. It is a declaration that your total tax liability for the year is nil.
· If TDS is Deducted: Even if TDS is cut, you can claim a refund when you file your ITR, provided your total income is below the taxable limit.

The Bottom Line for FD Investors

The RBI’s steady hand on the repo rate provides a clear signal: the era of rapidly rising FD rates may have paused, but a sharp decline is not imminent. For senior citizens, this is an opportune moment to:

1. Review Portfolio: Assess upcoming FD maturities and research the best rates available.
2. Consider SFBs: For higher returns, evaluate credible Small Finance Banks offering up to 8%.
3. Manage Tax: Ensure Form 15H is submitted proactively to prevent unnecessary TDS deductions and preserve cash flow.
4. Lock-in Rates: If you find a favorable rate for a suitable tenure, acting now can secure that return for the full deposit period, insulating you from future rate cuts.

While the Union Budget 2026 did not introduce specific changes for senior citizen FDs, the existing financial landscape, shaped by the RBI’s policy, still offers valuable avenues for generating a stable, tax-efficient income through fixed deposits. Investors are advised to consult with their financial advisors to align these options with their overall retirement income strategy.