Government schemes offering higher returns than bank FDs: Full list inside

Government small savings schemes now offer higher interest rates than many major banks, making them a great option for steady income investors.

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High-Interest Government Schemes

If you're looking to invest your savings for steady income, you might want to look beyond traditional bank fixed deposits. Several small savings schemes, backed by the central government, are now offering higher interest rates compared to many major banks.

These schemes not only provide guaranteed returns but are also considered safe due to the government backing. These options look even better as the central government has announced unchanged interest rates for the upcoming quarter, ending in September 2025.

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Repo Rate Cut

The Reserve Bank of India (RBI) has cut the repo rate by 100 basis points since February 2025. As a result, several banks, including State Bank of India (SBI), HDFC Bank, ICICI Bank, and Punjab National Bank (PNB), have reduced interest rates on fixed and savings deposits.

Conversely, the central government has kept the interest rates on small savings schemes like Public Provident Fund (PPF), National Savings Certificate (NSC), and Senior Citizens Savings Scheme (SCSS) unchanged. This decision has widened the gap between bank deposit returns and small savings scheme yields.

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Small Savings Schemes

Among the most rewarding options is the 5-year Post Office Time Deposit, which offers a 7.5% annual return for all depositors. The National Savings Certificate (NSC) provides a slightly better interest rate of 7.7%, with a 5-year lock-in period.

The Senior Citizens Savings Scheme (SCSS) is even more attractive, offering an 8.2% interest rate, the highest of the three. These schemes are not only tax-efficient in some cases but also ensure steady returns with zero market risk.

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Bank FD Rates

Currently, major banks offer lower returns on 5-year fixed deposits. For instance, SBI offers 6.3% interest to regular depositors and 6.8% to senior citizens. HDFC Bank provides 6.4% and 6.9% interest to general customers and senior citizens, respectively.

ICICI Bank fares slightly better with 6.6% and 7.1%, respectively, while PNB offers 6.5% to regular customers and 7% to senior citizens. Clearly, small savings schemes outperform these rates, providing better returns for both regular and senior investors.

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Secure & Guaranteed Returns

While fixed deposits in banks are considered safe, they are insured only up to ₹5 lakh (including interest) under the Deposit Insurance and Credit Guarantee Corporation (DICGC). Any amount exceeding this is not guaranteed if the bank fails.

Conversely, small savings schemes like PPF, NSC, and SCSS are backed by the central government and ensure full capital protection and guaranteed returns. With higher interest rates and the assurance of safety, these schemes are currently among the best options for conservative investors looking to beat bank FD returns.