Canara Bank vs Union Bank FD rates 2026: Which PSU bank offers higher returns for your fixed deposit?

Fixed Deposit Rates 2026: Investors looking for safe and predictable returns continue to favour bank fixed deposits (FDs), particularly after several lenders revised their deposit rates this year. Among public sector banks, Canara Bank and Union Bank of India are offering interest rates of more than 6.5% on select tenures, with senior citizens earning over 7% on special deposits.

A comparison of the latest FD rate cards shows that while both banks have introduced special-tenure deposits offering higher returns, Canara Bank has an edge across several standard maturities, whereas Union Bank offers the highest rate on a 555-day deposit.

Canara Bank FD rates

Canara Bank offers FD interest rates ranging from 3.00% to 6.60% per annum for general citizens and 3.00% to 7.10% for senior citizens on domestic deposits below Rs 3 crore.

The bank's highest interest rate of 6.60% is available on a 555-day fixed deposit. Senior citizens earn 7.10% on the same tenure, while super senior citizens aged 80 years and above receive an additional 0.10 percentage point on 444-day and 555-day deposits.

Union Bank FD rates

Union Bank of India offers FD interest rates ranging from 2.70% to 6.65% for general citizens and 3.20% to 7.15% for senior citizens.

Its highest interest rate of 6.65% for general depositors and 7.15% for senior citizens is also available on the 555-day tenure, making it one of the most attractive special deposits among PSU banks.

MUST READ: Bandhan Bank vs Bank of Baroda FD rates: Compare interest rates across 1-, 2-, 3- and 5-year tenures

Canara Bank vs Union Bank: Interest rate comparison

The comparison shows that Canara Bank offers higher rates across most standard one-year to five-year tenures, while Union Bank leads only on the 555-day special deposit by a narrow margin of 0.05 percentage point.

Senior citizen FD rates

Senior citizens looking for the highest return on the 555-day tenure may find Union Bank slightly more rewarding. However, Canara Bank provides better returns on its five-year tax-saving FD and several regular tenures.

Tax-saving FD comparison

Both banks offer five-year tax-saving fixed deposits that qualify for deduction under Section 80C of the Income-tax Act, subject to the overall annual limit.

ALSO READ: 8.5% FD vs 7% FD: How much extra can senior citizens earn on ₹10 lakh, ₹25 lakh, ₹1 crore?

Canara Bank pays 6.25% to general citizens and 6.75% to senior citizens on its tax-saving FD, compared with 6.00% and 6.50%, respectively, offered by Union Bank. For investors planning to lock in funds for five years while claiming tax benefits, Canara Bank currently offers a better return.

Which bank should investors choose?

For investors seeking the highest headline return, Union Bank has a marginal advantage with 6.65% for general citizens and 7.15% for senior citizens on its 555-day special deposit.

However, investors looking for flexibility across conventional one-year, two-year, three-year and five-year maturities may find Canara Bank more attractive, as it offers 6.25% across these tenures. The bank also stands out for its higher tax-saving FD rate and the additional benefit extended to super senior citizens.

Before investing, depositors should compare not only interest rates but also the investment horizon, premature withdrawal rules and liquidity requirements. It is also worth remembering that bank deposits of up to Rs 5 lakh per depositor per bank are covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC), providing an additional layer of protection for depositors.

DID YOU KNOW: Looking for higher FD returns? Here's how HDFC Bank and Axis Bank compare in July 2026

MUST READ: SIFs, mutual funds, PMS or AIFs: Which investment route deserves a place in your portfolio?