Despite a 100 basis point cut in the Reserve Bank of India’s repo rate since February 2025, some small finance banks are still offering attractive fixed deposit (FD) rates above 8% for general depositors on deposits below Rs 3 crore. While most banks have lowered interest rates in line with the policy easing, investors looking for higher returns can still lock in favourable rates before further reductions.Slice Small Finance Bank (formerly North East Small Finance Bank) is currently offering the highest FD interest rate of 9% for general citizens on tenures ranging from 18 months 1 day to 18 months 2 days, according to an ET report.Unity Small Finance Bank offers the next best rate of 8.60% for a tenure of 1001 days.Suryoday Small Finance Bank is offering 8.40% interest for general depositors for tenures above 30 months up to 3 years.Utkarsh Small Finance Bank is offering a peak rate of 8.25% for deposit tenures ranging from 2 years (730 days) up to 3 years (1095 days).Jana Small Finance Bank offers an 8.20% return on a 5-year (1825 days) fixed deposit.Here’s a snapshot of current top FD rates for general citizens from small finance banks (as of June 18, 2025):
Source: Paisabazaar.com , as cited the ET reportCommercial banks and small finance banks (SFBs) are both regulated by the Reserve Bank of India (RBI), but they differ significantly in terms of their operational models and target customer base.Commercial banks are large financial institutions that cater to the general population and offer a wide range of services, including all types of loan products. In contrast, small finance banks primarily focus on providing basic loan facilities such as personal loans, gold loans, MSME loans, and vehicle loans. Their primary target customers include small borrowers, micro-entrepreneurs, and the informal sector, particularly in underserved regions.Both types of banks offer remittance services and provide access to digital banking platforms. However, the capital requirement for setting up a commercial bank is significantly higher compared to a small finance bank, which requires a minimum capital of Rs 100 crore.Banking analysts advise investors to exercise prudence whilst considering investments in small finance banks, noting their elevated risk profiles compared to traditional commercial banks. While the Deposit Insurance and Credit Guarantee Corporation (DICGC) provides insurance coverage of up to Rs 5 lakh for all deposits, these institutions operate with distinct business frameworks unlike scheduled commercial banks, which could subject depositors to increased risk exposure, as reported by ET.
