The RBI’s 25 basis point hike on October 7 took the repo rate to 5.50% and shifted the stance to calibrated tightening.
If you have been scanning FD rate comparison tables lately, you will have noticed something uncomfortable. The NBFC column keeps paying more than the bank column. The gap in some tenures is now 75 to 125 basis points — meaningful money over a three-to-five-year horizon.
The headline name in the NBFC deposit space is Bajaj Finance. Its current FD rate card tops out at around 7.40 per cent per annum for regular depositors and 7.75 per cent per annum for senior citizens on the 31 to 60 month tenure band. That compares to roughly 6.60 to 6.90 per cent at the biggest private banks for similar tenures.
The gap has widened over the past six months as Bajaj Finance raised rates by up to 45 basis points in May 2026 and held them firm through subsequent revisions. Other deposit-taking NBFCs have moved in sympathy. Shriram Finance, LIC Housing Finance and Mahindra Finance are all running retail FD rates above most bank peers.
Why NBFCs Pay
The structural reason is straightforward. NBFCs rely more heavily on public deposits to fund their lending books — housing finance, vehicle loans, MSME credit, consumer durables. Banks, by contrast, have CASA (current and savings account) deposits available at near-zero cost, which pulls their blended cost of funds down and lets them under-price NBFCs on term deposits.
In a rising rate cycle, that structural gap widens. Each time the repo rate moves higher, NBFCs feel the funding pressure first — and pass through more of the increase to retail depositors to protect their lending spreads.
DICGC Insurance Does Not Cover
Here is the single most important thing a retail saver needs to understand before chasing an NBFC rate. The ₹5 lakh deposit insurance from DICGC, which automatically covers your bank FD across principal and interest, does not apply to NBFC fixed deposits. If the NBFC defaults, there is no backstop.
What NBFCs offer instead is credit ratings. Bajaj Finance carries CRISIL AAA/Stable and ICRA AAA/Stable — the highest safety ratings available to any NBFC FD in India. Shriram Finance, Mahindra Finance and LIC Housing Finance also carry AAA ratings from the major agencies.
The practical rule one can use, say experts, is to treat the credit rating as the equivalent of insurance for NBFC FDs. Anything less than AAA is not worth the extra 50 to 100 basis points of yield for a retail saver. And no NBFC FD, however highly rated, should take more than 20 to 30 per cent of your total fixed deposit allocation.
After the RBI Hike
The RBI’s 25 basis point hike on October 7 — repo rate now at 5.50 per cent, stance shifted to calibrated tightening — will push deposit rates higher across the board over the next one to two quarters. Both banks and NBFCs will revise upward, but NBFCs are likely to move first and move more.
Goldman Sachs expects a further 25 basis point hike in December and 50 basis points in the first half of 2027, which would take the repo rate to 6.25 per cent. If that trajectory plays out, retail FD rates by mid-2027 will be meaningfully above today’s levels.
A short-tenure deposit of six to twelve months followed by a reassessment is likely to deliver a better overall return than a 36 to 60 month deposit booked today.
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