Andrew Patrick, 40, pointed a gun at Alistair Rankine before giving him a bag said to have a bomb inside.
He then ordered the driver to steal cash from a Bank of Scotland branch in Kirkcaldy on 11 November 2015.
The judge said the offence was utterly appalling and had a significant effect on the taxi driver.
Patrick, from Lochgelly, was sentenced at the High Court in Glasgow.
In March, he pleaded guilty to abduction, assault and robbery.
The alleged explosive device was later found to pose no risk to the public.
Earlier, the court heard Patrick was working as a gym instructor, earning up to Â£300 a week at the time, but prosecutor Allan Nicol said he was facing financial difficulties.
Det Sgt Graeme Dursley of Police Scotland, said: "This was a terrifying ordeal for the taxi driver and members of staff at the bank, especially given the threat of an alleged explosive device, who must be commended for their bravery throughout the ordeal last November.
"I want to praise the taxi driver and the bank staff for their courage and their assistance during our investigation.
"The business premises around the bank deserve our thanks too for providing us with vital CCTV footage as well as the wider community of Kirkcaldy for their continued support of this investigation."
He added: "Officers responded quickly to ensure the safety of local residents, utilising EOD resources to ensure there was no threat posed by the device.
"It is also a testament to the extensive inquiries carried out by the investigation team to identify Patrick as the assailant that he will now spend a significant period of time in jail."
A man who forced a taxi driver to carry out a bank robbery by threatening staff with a fake bomb in Fife has been jailed for six years and nine months.