Quick answer: In October 2026, 12-month fixed deposits in Sri Lanka pay about 7.25% to 8.5% at the state banks and around 10% to 10.5% at the main private banks such as Commercial Bank, HNB, Sampath and DFCC, while licensed finance companies offer roughly 9% to 12.5% for higher risk. Rates rose after the Central Bank raised its Overnight Policy Rate by one point to 8.75% on 26 May 2026. A 10% Advance Income Tax is deducted from interest unless you declare total income under Rs 1.8 million, and deposits are insured up to Rs 1.1 million per depositor per institution. With inflation at 8.0% in September 2026, only the better rates beat rising prices.
LKFD102112-month FD rates in October 2026
| Institution | 12 months (at maturity) | Notes |
|---|---|---|
| Bank of Ceylon | 7.25% | senior citizens 7.75%; rate sheet from June 2026 |
| National Savings Bank | 7.25% | 2 years 7.75% |
| Commercial Bank | 10.00% | 2 years 11.00%; slightly more for online FDs |
| HNB | 10.00% | 2 years 12.00% (from 26 September 2026) |
| Sampath Bank | 10.00% | 2 years 11.25% (from 22 September 2026) |
| DFCC Bank | 10.50% | 2 years 11.00% (from 1 October 2026) |
| LB Finance | 11.50% | licensed finance company, longer terms higher |
Rates come from bank rate sheets and comparison sites checked between late September and 21 October 2026. Aggregators often disagree, for example on People's Bank's one-year rate, so confirm the rate with the institution before you place money; monthly-interest FDs pay slightly less than interest at maturity. The state banks have not moved their rate sheets since June, which is why they now trail the private banks by almost three points. For a wider view of savings options, see our comparison of bank interest rates and the profiles of Bank of Ceylon and Commercial Bank.
What Rs 1 million earns in a year
Our calculation: Rs 1,000,000 for 12 months earns Rs 72,500 at 7.25%, Rs 100,000 at 10% and Rs 115,000 at 11.5%; after the 10% Advance Income Tax you keep Rs 65,250, Rs 90,000 and Rs 103,500. Choosing a private bank over a state bank adds about Rs 24,750 a year on this amount. With headline inflation at 8.0% year on year in September 2026, the highest in more than three years, a 7.25% deposit loses purchasing power, while a 10% deposit earns a small real return before tax.
Two regulatory details matter more than most rate comparisons. Since 23 June 2025, Finance Business Act Directions No. 01 of 2025 have tied the maximum nominal deposit rate that licensed finance companies may offer to the Overnight Policy Rate and Treasury bill yields. In practice, a finance company quoting far above the market is constrained by that statutory ceiling, so an advertised rate far above its peers is a reason to ask questions, not to hurry.
The next Monetary Policy Board review is scheduled for 20 November 2026. At the 29–30 September 2026 meeting the Overnight Policy Rate was left unchanged, so rate sheets set in the first half of October 2026 reflect that hold. Sampath Bank's card took effect on 22 September 2026 and HNB's on 26 September 2026, while DFCC Bank's was set on 1 October 2026; older cards such as Bank of Ceylon's from 8 June 2026 are more exposed to a November move. If you are weighing a two-year lock-in, compare how far each card is from its effective date on our side-by-side bank rate comparison.
Tax on FD interest
Since 1 April 2025, banks and finance companies deduct Advance Income Tax of 10% from interest, up from 5%. The tax is not final: it counts towards your annual income tax. If your total assessable income from all sources is Rs 1.8 million or less for the year, you have no income tax to pay and can submit a self-declaration to stop the deduction at source. Senior citizens no longer have a separate threshold and use the same Rs 1.8 million rule. If tax was deducted although your income is below the threshold, you can reclaim it through your tax return.
Bank or finance company: how safe is your deposit?
The Sri Lanka Deposit Insurance and Liquidity Support Scheme covers up to Rs 1.1 million per depositor at each licensed bank and licensed finance company, an increase from the earlier Rs 600,000 that the Central Bank reaffirmed in January 2026. Finance companies pay more because their risk is higher, and the Central Bank has restricted or wound up several weaker ones over the years, so keep amounts above the insured limit with stronger institutions or split them. Only deposit with institutions on the Central Bank's lists of licensed commercial banks, specialised banks and licensed finance companies. Promises of very high returns from unlicensed schemes or pyramid structures are illegal, and the Central Bank regularly warns the public about them.
Policy rate and outlook
The Central Bank moved to a single Overnight Policy Rate in late 2024. After holding it at 8.00% in 2025 and cutting to 7.75%, it raised it to 8.75% on 26 May 2026 because of higher global oil prices and energy costs, and kept it unchanged in July and at the end of September 2026. Banks raised FD rates through September and October in response. If you expect rates to rise further, a shorter term keeps your options open; if you want to lock today's higher private-bank rates, a two-year FD pays more. Complaints go first to the bank or finance company; if unresolved, you can contact the Central Bank's Financial Consumer Relations Department or the Financial Ombudsman of Sri Lanka.
Before you commit, ask the branch for the printed rate card and note its effective date in writing; some cards date from June 2026, others from early October 2026, and a quote that cannot show a date should be treated as provisional. Because the next policy review falls on 20 November 2026, anyone able to wait a few weeks can decide after that decision rather than before it. Check whether the rate applies to interest at maturity or to monthly payouts, since the monthly figure is lower. If a finance company's advertised return looks far above the licensed banks, confirm its licence on the Central Bank list and keep each deposit within the insured limit, then compare the printed cards of at least two institutions using the Commercial Bank rate profile as a private-bank benchmark.