Fixed deposits (FDs) continue to remain one of the most preferred investment avenues for Indian savers, especially among conservative investors and retirees seeking stable and predictable returns. However, the fixed deposit market in 2026 is witnessing a growing gap between returns offered by traditional banks and non-banking financial companies (NBFCs), with several NBFCs now offering significantly higher interest rates than most public and private sector banks.

According to the latest FD rate data as of May 2026, NBFC fixed deposits are offering returns ranging from around 6.6% to as high as 8.5% for general investors, while some senior citizen schemes are offering rates approaching 9%. 

The higher yields are attracting increasing investor attention at a time when equity market volatility remains elevated and many savers are looking for stable income-generating instruments.

NBFCs dominate

Among major NBFCs, Muthoot Capital Services is currently offering one of the highest FD rates in the market at 8.5% on select tenures. Manipal Housing Finance Syndicate is offering rates up to 8.25%, while Sundaram Finance offers returns ranging up to 8.07%. Shriram Finance is offering rates up to 7.6%, according to the latest FD comparison data. 

The data reflects how NBFCs are increasingly competing aggressively for retail deposits by offering superior rates across medium- and long-term tenures.

Banks FDs

Compared to NBFCs, most public sector banks continue to offer more conservative FD rates. State Bank of India currently offers a maximum FD rate of 6.45%, while Bank of Baroda offers 6.45%, Punjab National Bank 6.60%, and Canara Bank 6.60% on select tenures. 

Why NBFCs offer higher interest rates

Financial experts say NBFCs generally offer higher FD returns because they operate with relatively higher funding costs and carry greater credit risk compared to traditional commercial banks.
Unlike banks, NBFCs do not have access to low-cost CASA (Current Account Savings Account) deposits on the same scale. As a result, they rely more heavily on fixed deposits and market borrowings to raise funds, often incentivising investors through higher interest rates.

However, experts caution that higher returns should not be viewed in isolation. Financial planners always said that higher FD rates usually come with relatively higher risk. Investors should evaluate the institution’s credit rating, financial strength, liquidity profile, and repayment history before investing.

Advantage senior citizens

Senior citizens remain among the biggest beneficiaries in the FD market, with most banks and NBFCs offering additional interest ranging from 0.25% to 0.75% above standard FD rates.
In several cases, senior citizen FD rates are now exceeding 8.5%, making them attractive for retirees looking for predictable monthly or quarterly income.

What investors should keep in mind

Experts advise investors not to allocate all savings into a single high-yield FD product. Instead, diversification across institutions and careful evaluation of safety metrics remain critical.
Key factors investors should consider include:

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• Credit ratings
• Deposit insurance coverage
• Liquidity needs
• Interest payout frequency
• Institution stability
• Tenure suitability

With interest rates remaining elevated and investors increasingly prioritising stable returns over market-linked volatility, NBFC fixed deposits are emerging as a popular alternative for savers willing to balance higher yields with measured risk.

Published on: May 8, 2026 6:20 AM IST