For middle-class investors who prefer safe investments with guaranteed returns, 2026 brings important changes. This year, the Reserve Bank of India (RBI) cut the repo rate by 1.25%, which has had a major impact on the banking sector.
Due to this rate cut, many banks have started reducing their fixed deposit (FD) interest rates. However, Post Office Time Deposit (TD) schemes continue to offer strong and stable returns.
Let’s compare the interest rates of banks and the Indian Post Office to understand where investors can earn better returns.
Why the Post Office Offers a Special Advantage
The biggest benefit of investing in the Post Office is that its interest rates are directly decided by the government. These rates do not change immediately with repo rate cuts.
Even after the recent reduction in the repo rate, the Post Office still offers an attractive 7.5% annual interest rate on its 5-year FD.
Another advantage is quarterly compounding, which helps your money grow faster compared to many bank FDs.
In addition, investments in the Post Office 5-year FD qualify for tax benefits under Section 80C of the Income Tax Act, making it a popular choice for long-term investors.
Returns on ₹1 Lakh FD in the Indian Post Office
If you invest ₹1 lakh in a 5-year Post Office Time Deposit at an interest rate of 7.5% with quarterly compounding, you will receive a total of ₹144,995 after five years. This means you earn a guaranteed interest of ₹44,995.
Similarly, if you invest ₹10 lakh, the total interest earned will be ₹4,49,948, and the maturity amount will be ₹14,49,948 after five years.
Returns on ₹1 Lakh FD in Public Sector Banks
Public sector banks such as SBI, PNB, and Bank of Baroda currently offer interest rates between 5.00% and 6.40% on 5-year FDs. The lowest rate among these banks is around 5%.
For example, if you invest ₹1 lakh in a bank like Bank of Maharashtra at this lower rate, you will receive approximately ₹128,204 after five years.
At the highest rate of 6.40%, offered by banks like Bank of Baroda, the maturity amount on ₹1 lakh will be around ₹137,364.
Compared to Post Office FDs, investors may earn ₹7,000 to ₹16,000 less by choosing public sector banks.
Returns on ₹1 Lakh FD in Private Sector Banks
Private sector banks are currently offering interest rates ranging from 5.75% to 7.00% on 5-year FDs. If you invest ₹1 lakh in a bank like CSB Bank, the maturity amount after five years will be around ₹133,036.
Some private banks, such as IDFC First Bank and DCB Bank, offer the highest interest rate of up to 7.00%. At this rate, a ₹1 lakh investment can grow to a maturity value of approximately ₹141,478 after five years.
