At a time when most banks are reducing fixed deposit (FD) interest rates, Bank of India has surprised customers by increasing rates on select deposits.
The new FD rates came into effect on May 18 and apply to deposits below Rs 3 crore.
The move is unusual because many banks have been cutting rates after the Reserve Bank of India (RBI) lowered the repo rate by 125 basis points since February 2025.
While several lenders are offering lower returns on deposits, Bank of India is now giving better rates in the 1-year to 3-year category.
New FD Rates for Customers
Here are the revised FD interest rates offered by Bank of India:
| Tenure | Regular Customers | Senior Citizens | Super Senior Citizens |
|---|---|---|---|
| 1 year to less than 2 years | 6.50% | 7.00% | 7.15% |
| 2 years to less than 3 years | 6.60% | 7.10% | 7.25% |
| 3 years | 6.70% | 7.45% | 7.60% |
The bank has also announced additional benefits for older customers. Senior citizens will get up to 75 basis points extra on certain deposits, while super senior citizens can receive up to 90 basis points more.
For non-callable deposits above Rs 1 crore with a minimum tenure of one year, the bank is offering an extra 15 basis points.
Why Most Banks Are Cutting FD Rates
Since February 2025, the RBI has reduced the repo rate several times to support economic growth.
After these cuts, many public and private sector banks lowered FD interest rates, especially in the 1–3 year segment.
Banks usually reduce deposit rates when borrowing becomes cheaper.
This helps them protect profit margins in a low-interest-rate environment.
However, fixed deposits continue to remain popular among conservative investors because they offer stable returns and capital protection.
What FD Investors Should Keep in Mind
Experts say investors should not choose an FD based only on the highest advertised interest rate.
Before investing, depositors should check:
Whether the rate is available only for a specific tenure
Premature withdrawal penalties
Differences between callable and non-callable deposits
Post-tax returns
Extra benefits for senior citizens
Bank of India’s latest rate hike may look attractive in the current market, but financial experts suggest investors should also consider liquidity needs and tax efficiency before locking in their money for longer periods.
