Canara Bank has updated its fixed deposit (FD) interest rates, offering the highest returns on select short- and mid-term deposits.
The new rates came into effect on January 5, 2026.
Senior citizens benefit the most, with some callable FDs offering up to 7% interest, even as overall deposit rates decline following recent Reserve Bank of India (RBI) policy easing.
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Special Tenure FDs Offer Higher Returns
Under the revised structure, short- and mid-term special tenures continue to provide better returns than long-term FDs, especially for senior citizens.
555-day Fixed Deposit:
General public: 6.50%
Senior citizens: 7.00%
444-day Fixed Deposit:
General public: 6.45%
Senior citizens: 6.95%
For other callable tenures beyond one year, rates are capped at 6.25% for regular customers and 6.75% for senior citizens, indicating that longer lock-ins no longer earn higher interest.
RBI Rate Cuts Affect FD Returns
FD rates are softening due to monetary easing by the RBI.
Since last year, the repo rate has been reduced by 125 basis points, bringing it down to 5.25% after the latest cut of 25 bps.
Lower policy rates reduce banks’ cost of funds, which in turn leads to gradual cuts in deposit rates, especially for longer-term FDs.
Over the past year, multi-year deposits have seen the steepest decline in returns.
Other PSU Banks Also Cut FD Rates
Canara Bank is not alone—several other public sector banks have revised FD rates this month:
Bank of Baroda (from January 5, 2026):
General public: 3.50% to 6.45%
Senior citizens: up to 7.00%
Super senior citizens: up to 7.05%
Highest rate: 444-day Square Drive Deposit
Bank of Maharashtra (from January 7, 2026):
General public: 2.60% to 6.65%
Senior citizens: additional 0.50%
Highest return: 400-day FD at 7.15% for senior citizens
What FD Investors Should Know
With deposit rates on a downward trend, banks are focusing on short- and mid-term FDs to attract customers.
For investors—especially senior citizens—400–555 day deposits currently offer better returns than long-term FDs, where interest rates have largely flattened.
This means that locking money for five years or more may no longer be the best strategy.
Choosing the right special tenure FD can help maximize returns while keeping your money accessible.