Bonds vs Fixed Deposit: which pays more in India?
The best bank fixed deposit rate we have verified pays 6.60%. Listed corporate bonds on RightBonds currently yield up to 16%, averaging 10.4%. That gap is real, and it is payment for risks an FD doesn't have. This guide shows both sides live (skip to the rate tables) and explains exactly what you trade for the extra yield.
Who bonds suit
Fixed income investing in India spans corporate bonds rated AAA down to BBB from private issuers. Today the median AAA listing yields 7.50% and the top of the whole list reaches 16%, so bonds can be a higher-return alternative to fixed deposits for retail, senior citizen and NRI investors. The right bond depends on your risk appetite, investment horizon, and minimum investment threshold.
The comparison at a glance
| Measure | Bank FD | Listed bond |
|---|---|---|
| Typical return | 6.60% best verified, 7.10% for senior citizens | 10.4% average, up to 16% (Oct 2026) |
| Insurance | DICGC up to ₹5 lakh | None - issuer credit risk |
| Exit before term | Penalty on interest | Sell on exchange at market price |
| Price risk | None | Yes, if sold before maturity |
| Tax on interest | Slab rate | Slab rate (tax-free bonds exempt) |
| Minimum | Set by the bank, usually four figures | Often ₹10,000 to ₹1 lakh; see bonds under ₹10,000 |
Live rates right now
Both halves of this comparison are rebuilt from source every day: the deposit side from each bank's own published rate table, the bond side from 315 listed bonds. Last rebuilt 26 October 2026.
Bank FD rates
RightBonds holds hand-read rate tables for 2 banks so far, covering deposits below ₹3 crore. Each row shows that bank's best general-public rate, the tenure that rate actually applies to, and the senior citizen rate on the same slab. Figures come from the bank's own page, linked in the first column, never from an aggregator and never estimated.
| Bank | Best general rate | Tenure | Senior citizen | Effective from | Last verified |
|---|---|---|---|---|---|
| Punjab National Bank | 6.60% | 444 days | 7.10% | 1 Jun 2026 | 11 Oct 2026 |
| State Bank of India | 6.40% | 730 to 1094 days | 6.90% | 15 Dec 2025 | 11 Oct 2026 |
The most recent rate revision in this table took effect 1 Jun 2026, 147 days ago. Banks revise deposit rates without notice, so open the bank's own page before you act on a figure here.
Best verified rate: 6.60% at Punjab National Bank for the general public, 7.10% for senior citizens. Last verified 11 Oct 2026. That is a small sample of Indian banking and we would rather say so than pad the table: banks are added as each one's published schedule is read and dated.
Bond yields by credit band
The same day's listings, grouped into risk tiers rather than the individual grades. Median is the middle bond in the band, so a single outlier cannot flatter it; the highest column shows what the top of that band pays. Follow a grade to see the listings behind the number.
| Band | What it means | Live bonds | Median YTM | Highest YTM | Grades |
|---|---|---|---|---|---|
| AAA | Highest safety | 9 | 7.50% | 8.10% | AAA |
| AA band | Very high safety | 101 | 9.00% | 11.50% | AA+, AA, AA- |
| A band | Adequate safety | 116 | 10.75% | 15.10% | A+, A, A- |
| BBB and below | Moderate safety, lowest investment grade | 89 | 11.80% | 16.00% | BBB+, BBB, BBB- |
Sovereign listings sit outside these bands (4 today): a G-Sec carries the credit of the Government of India rather than a company's, so it does not belong on the same ladder. Browse them under sovereign.
What survives tax
Interest from a bond and interest from a deposit are both added to your income and taxed at your slab, so the headline gap narrows once tax is out of the way. Worked at the 30% slab on ₹1 lakh held for a year, using the two tables above: the best verified FD at 6.60% keeps 4.62%, or ₹4,620. The median AA-rated bond at 9.00% keeps 6.30%, or ₹6,300. The bond finishes ₹1,680 ahead, and that difference is the price of taking an issuer's credit risk instead of a bank's. Surcharge and the 4% health and education cess are not applied here. Run it at your own slab and amount in the post-tax yield calculator, or against a specific FD tenure in the bond vs FD calculator.
Where the extra yield comes from
A bond's yield prices its issuer's credit risk. A AAA-rated issuer borrows nearly as cheaply as the government; a BBB-rated NBFC must pay several points more to attract lenders. Ratings from CRISIL, ICRA and CARE grade that risk - see our bond ratings guide for the full scale, or browse AAA bonds versus higher-yield grades to see the premium directly.
The risks an FD doesn't have
- Default risk. If the issuer fails, coupons and principal are at risk. This is the big one - diversify across issuers and prefer rated paper.
- Price risk. Rates up → bond prices down. Only matters if you sell early; held to maturity, you get the YTM you bought.
- Liquidity risk. Some listed bonds trade thinly; exiting large amounts quickly can cost a discount.
When each makes sense
FD: emergency funds, sums under DICGC cover, money you may need on short notice. Bonds: surplus you can hold to maturity, seeking the 2.4 points the median AA bond currently pays over the best verified FD, with eyes open on credit risk. Many investors ladder both, FDs for liquidity and bonds for return. If the point of the money is income rather than growth, note that a bond’s payout schedule is fixed by the issuer at the time of issue: bonds that pay monthly land interest every month, while the rest pay quarterly, half-yearly, annually or only at maturity.
Frequently asked questions
Still weighing bonds vs FD?
See live yields side by side and judge the risk premium yourself.
Compare live yieldsAre bonds safer than fixed deposits?
No. Bank FDs up to ₹5 lakh are insured by DICGC; bonds are not insured and carry the issuer's credit risk. Higher bond yields are compensation for that risk. Government securities (G-Secs) are the exception - they carry sovereign credit.
Can I lose money in a bond?
Yes, in two ways: the issuer defaults, or you sell before maturity at a lower market price. Held to maturity with no default, you receive the yield you locked in at purchase.
How are bonds taxed compared to FDs?
Interest from both is taxed at your slab rate. Listed bonds sold on an exchange after 12 months attract capital-gains treatment on the price component, and tax-free bonds pay coupon exempt from income tax - two advantages FDs don't have.
What is a good yield premium over an FD?
Judge it against today’s spread rather than a rule of thumb. As of Oct 2026 the median AA-rated bond on RightBonds yields 9.00%, which is 2.4 percentage points over the best verified bank FD of 6.60%. A bond paying far more than the band it sits in is telling you the market prices meaningful credit risk into it, so read the rating rationale before investing.