With market volatility and uncertainty around risk-based investments, Fixed Deposits (FDs) continue to be a preferred choice for Indian savers. As we move into 2026, public sector banks have revised their FD interest rates to attract deposits, making it important for investors to know which public sector bank is offering the highest FD returns in 2026.
Backed by the Government of India, public sector banks offer safety, trust, and predictable returns, making them ideal for conservative investors and senior citizens.
Why Public Sector Bank FDs Are Still Popular in 2026
Public sector bank FDs are considered one of the safest investment options in India. They offer capital protection, assured returns, and easy liquidity. In 2026, with inflation concerns still present, banks have adjusted FD rates to remain competitive while maintaining financial stability.
Senior citizens, retirees, and risk-averse investors continue to prefer PSU bank FDs due to government backing and transparent interest structures.
Public Sector Banks Offering the Best FD Rates in 2026
Several public sector banks are offering attractive FD interest rates in 2026, especially for specific tenures and senior citizens.
State Bank of India offers competitive FD rates across short and medium tenures. While SBI may not always top the interest rate charts, it remains a trusted option due to its strong balance sheet and nationwide presence.
Bank of Baroda has emerged as one of the strongest contenders in 2026, offering higher interest rates on select medium and long-term FD tenures, making it attractive for both regular and senior citizen investors.
Punjab National Bank continues to offer solid FD returns, particularly on longer tenures. Its senior citizen FD rates are among the more competitive options within the PSU banking space.
Other public sector banks like Canara Bank and Union Bank of India are also offering enhanced FD rates in 2026, especially through special tenure deposit schemes.
Highest FD Rates for Senior Citizens in 2026
Senior citizens generally receive an additional interest benefit over regular depositors. In 2026, many public sector banks are offering extra interest ranging from 0.25 percent to 0.50 percent for senior citizens.
This makes PSU bank FDs a reliable income source for retirees who want steady interest payouts without market risk.
How to Choose the Best FD Bank in 2026
While interest rate is important, investors should also consider tenure flexibility, premature withdrawal rules, interest payout options, and bank credibility. A slightly lower rate with better liquidity and service may be more suitable for some investors.
Diversifying FD investments across two or more public sector banks can also help manage liquidity needs and rate risk.
Taxation on FD Interest
FD interest continues to be taxable as per the investor’s income tax slab in 2026. Senior citizens can benefit from higher exemption limits under existing tax provisions, and submitting relevant declarations can help avoid unnecessary tax deductions.
Investors should factor in post-tax returns while comparing FD rates across banks.
What Investors Should Do Now
Before investing, savers should compare the latest FD rate charts, check special tenure schemes, and confirm senior citizen benefits. FD rates may change depending on liquidity conditions and monetary policy, so locking in a higher rate at the right time can be beneficial.
Conclusion: The best public sector bank FD rates in 2026 are being offered by banks like Bank of Baroda, Punjab National Bank, Canara Bank, and State Bank of India across selected tenures. While Bank of Baroda and PNB currently stand out for higher returns, SBI continues to offer unmatched trust and stability. Investors should choose FD schemes based on a balance of interest rate, tenure needs, and financial goals to maximize safe returns in 2026.
Disclaimer: This article is for informational purposes only. FD interest rates are subject to change based on bank policies and RBI guidelines. Actual returns may vary depending on tenure, deposit amount, and investor category. Readers are advised to verify current rates directly with respective banks before investing.