The Reserve Bank of India has raised the policy repo rate by 25 basis points to 5.50%, marking the central bank's first rate hike since February 2023. As per RBI Governor Sanjay Malhotra, the Monetary Policy Committee unanimously decided in favour of hike in policy interest rate on Wednesday, October 7. This decision comes after the repo rate had remained at 5.25% for the previous four policy reviews, with the latest move marking a shift in the interest-rate cycle amid renewed inflationary pressures, elevated crude oil prices and tighter global financial conditions. For fixed deposit investors, a higher repo rate could eventually translate into better rates on fresh deposits as banks reassess their funding costs and compete for deposits, though the transmission is not automatic. However, as Adhil Shetty, CEO of BankBazaar, explains, existing FDs continue to earn the rate at which they were booked - the impact is more relevant for new deposits and FDs that mature and are renewed after banks revise their deposit rates. While a repo rate hike does not automatically mean that FD rates will rise immediately or by the same amount, banks could gradually revise deposit rates depending on their funding requirements, liquidity position and competition for deposits. The transmission from the repo rate to fixed deposit rates is not one-to-one, and banks consider several factors including their liquidity position, credit demand, existing deposit base, maturity profile and competition from other lenders before changing deposit rates.
According to BankBazaar.com data compiled as of October 2, 2026, fixed deposit interest rates vary significantly across different bank categories. Foreign banks currently offer the highest rates, with DBS Bank leading at 6.5% across all tenures, followed by Standard Chartered at 6.5% for 2-3 years and 3-5 years. Indian public sector banks show competitive rates, with Central Bank of India providing 6.75% for 1-2 years, while Bank of Baroda offers 6.6% for 3-5 years. Private sector banks maintain competitive positioning, with Bandhan Bank leading at 7.45% for short-term deposits, and DCB Bank offering 7.5% for longer tenures. Senior citizens can secure fixed deposit rates as high as 8.50% in October 2026, with rates taken from Paisa Bazaar updated on October 1, 2026, applying to deposits below ₹3 crore. Small finance banks offer the highest maximum rates, with Equitas Small Finance Bank, ESAF Small Finance Bank, and Suryoday Small Finance Bank each showing a maximum of 8.50% for five-year deposits, while Jana Small Finance Bank offers 8.30% for three years and Ujjivan Small Finance Bank provides 8.30% for one and three years.
As reported by BankBazaar.com, State Bank of India offers 6.45% for 1-2 years, while Bank of India provides 6.7% for 2-3 years. Canara Bank and Central Bank of India both offer 6.25% for 3-5 years. Indian Bank provides 6.6% for 3-5 years, with Indian Overseas Bank offering 6.4% for the same tenure. Punjab National Bank offers 6.35% for 3-5 years, and Punjab & Sind Bank provides 5.95% for 3-5 years. UCO Bank and Union Bank both offer 6.1% for 3-5 years. Among public sector banks, Bank of India has the highest maximum rate at 7.45% for three-year deposits, with one-year rates at 7% and five-year deposits earning 6.75%. Senior citizens can secure rates up to 7.45% with Bank of India, while Punjab National Bank offers 7.10% maximum for senior citizens, with rates of 6.75% for one year, 6.80% for three years, and 6.60% for five years.
According to the BankBazaar.com data, small finance banks demonstrate the highest rates, with Suryoday Small Finance Bank leading at 8.50% for five-year deposits, followed by Equitas Small Finance Bank at 8.50% for the same tenure. Jana Small Finance Bank offers 8.30% for three years and 7.77% for five years. Among private sector banks, Bandhan Bank provides 7.95% for senior citizens, while DCB Bank offers 8% for five-year deposits, 7.25% for three-year deposits, and 7.15% for one-year deposits. Karur Vysya Bank and Tamilnad Mercantile Bank both provide 7% for 3-5 years. IDFC First Bank offers 7.35% maximum for senior citizens, and RBL Bank provides 7.70% for one and three years, 7.75% for five years. SBM Bank has the highest maximum rate among private banks at 8.15%, with one-year and three-year rates both at 7.60%, while five-year deposits earn 7.50%.
Senior citizens can secure fixed deposit rates as high as 8.50% in October 2026, with rates taken from Paisa Bazaar updated on October 1, 2026, applying to deposits below ₹3 crore. Small finance banks offer the highest maximum rates, with Equitas, ESAF and Suryoday Small Finance Banks each showing a maximum of 8.50%. Suryoday offers 8.50% for five years, compared with 7.40% for one- and three-year terms. Equitas provides 7.60% for 1 and 3 years, and 7.50% for 5 years. Jana Small Finance Bank offers 8.30% for three years and 7.77% for five years. Among private banks, DCB Bank offers a maximum rate of 8% for five-year deposits, while Bandhan Bank's maximum is 7.95%. IndusInd and YES Bank both offer 7.75% for three-year deposits, with five-year rates at 7.15% and 7.50% respectively. Senior citizens should compare the interest rate applicable to the specific tenure for which they intend to keep their money, rather than choosing an FD solely on the basis of the highest advertised rate, as the highest FD rate does not apply across all tenures. Check premature withdrawal rules, taxation and deposit insurance before investing, as breaking an FD before maturity may affect interest payable and can attract penalties depending on the bank and deposit product.
FD investors should not assume that every bank will immediately increase deposit rates following the RBI's decision, as banks decide their FD rates based on their liquidity position, funding requirements and competitive conditions. According to Adhil Shetty, CEO of BankBazaar, existing FDs continue to earn the rate at which they were booked - the benefit will build up gradually as banks revise rates. For investors with deposits maturing soon, those with deposits maturing soon can compare the revised rates offered by different banks before reinvesting. The immediate impact of a 25-basis-point hike may be limited for some borrowers, but the effect can become more significant if banks pass on the increase fully or if additional rate hikes follow. A rate-hike cycle could benefit savers looking to invest in fixed deposits, as people with excess money could lock in higher returns. However, investors should not rush to book very long-term FDs solely because of a single repo rate hike. If the RBI enters a prolonged rate-hiking cycle, FD rates could rise further in stages, and locking the entire amount into a long-term FD immediately could mean missing out on potentially higher rates later. Existing borrowers should check their loan agreement and understand which benchmark their interest rate is linked to and how quickly changes are transmitted. FD laddering can help investors manage reinvestment risk effectively by dividing funds across deposits with different maturity dates, ensuring periodic availability of funds for reinvestment at prevailing rates.
