Canara Bank Removes Minimum Balance Rule and Revises FD Rate

Canara Bank Removes Minimum Balance Rule and Revises FD Rates: What It Means for You

Introduction: A Customer-Friendly Banking Shift

Public sector giant Canara Bank has made a move that’s creating a buzz across financial circles — the removal of the minimum balance requirement for its savings accounts, alongside a fresh revision in fixed deposit (FD) interest rates.

With over 10 crore customers nationwide, this step signals a shift toward inclusive, customer-centric banking, especially at a time when financial accessibility and savings optimization are under the spotlight.

Let’s break down what this policy change means for account holders, investors, and the Indian banking sector.

Why Canara Bank Took This Decision

The banking landscape in India is evolving rapidly — driven by digital transformation, fintech competition, and rising customer expectations.

In 2024, major private and public banks faced criticism for penalizing low-balance accounts, often belonging to students, pensioners, and rural users. Canara Bank’s decision aims to address this gap and strengthen trust among small depositors.

The bank stated that the move supports the “Financial Inclusion Vision 2025” — ensuring that every Indian can access modern banking facilities without fear of penalties or hidden fees.

Understanding the Policy: No More Minimum Balance

Earlier, Canara Bank required customers to maintain an Average Monthly Balance (AMB) ranging from ₹1,000 to ₹5,000, depending on the account type and branch category (urban, semi-urban, or rural).

Under the new policy (effective November 2025):

Zero AMB requirement for all standard savings accounts.

No penalties or service charges for low or nil balances.

Continued access to ATM, internet banking, and UPI facilities regardless of balance.

Interest on savings accounts remains unchanged at current levels.

This makes Canara Bank one of the few large public-sector banks offering true zero-balance savings accounts across all branches.

FD Interest Rate Revision: Small Savers Win Big

Alongside the balance rule change, Canara Bank also announced revised Fixed Deposit (FD) interest rates, effective from 1 November 2025.

Here’s a simplified look at the new FD rates (general public vs. senior citizens):

Tenure Earlier Rate Revised Rate Senior Citizen Rate

7 – 45 days 3.50 % 3.75 % 4.25 %

46 – 179 days 4.75 % 5.00 % 5.50 %

180 – 364 days 6.00 % 6.25 % 6.75 %

1 – 2 years 6.85 % 7.10 % 7.60 %

2 – 3 years 6.75 % 7.00 % 7.50 %

Above 3 years 6.50 % 6.75 % 7.25 %

This revision positions Canara Bank competitively against peers like SBI, PNB, and Union Bank, particularly for short-term FDs (under 1 year) — a segment witnessing strong retail participation.

Impact on Customers

Pensioners and Senior Citizens

Benefit most from higher FD rates and zero-penalty savings accounts.

Easier digital banking access for pension credits via Jeevan Pramaan and UPI.

Students and New-to-Bank Users

No fear of deductions for low balance.

Encourages financial discipline through regular digital transactions.

Salaried Professionals

More liquidity without worrying about AMB maintenance.

Option to divert excess salary funds to high-interest FDs.

Rural and Semi-Urban Customers

Boosts financial inclusion.

Removes long-standing deterrent to maintaining active bank accounts.

Industry Reaction: A Competitive Ripple

Banking analysts describe this move as “customer-positive and digitally strategic.”

According to a report by The Financial Express, Canara Bank’s initiative could prompt other PSU banks to follow suit, especially those targeting youth and low-income segments.

Private players like HDFC Bank, ICICI Bank, and Axis Bank still maintain minimum-balance conditions, but they’re expected to re-evaluate if customer migration increases toward zero-balance PSU accounts.

How It Affects India’s Banking Ecosystem

Enhanced Financial Inclusion: Removes economic barriers for first-time account holders.

Digital Account Penetration: Boosts mobile-first banking adoption in smaller towns.

Higher Retail Deposits: Zero-balance accounts often convert to long-term customers, leading to increased FD mobilization.

Competitive Realignment: Forces other banks to innovate around interest rates, customer service, and tech convenience.

This reform supports the government’s broader agenda of Digital India + Jan Dhan 2.0, focusing on accessible and technology-driven banking.

How to Open or Convert Your Canara Account

Existing customers can convert their regular savings accounts into zero-balance accounts via:

The official Canara Bank mobile app or net-banking portal.

Visiting a nearby branch and submitting a simple form.

New users can open accounts online using Aadhaar + PAN-based e-KYC, without visiting a branch — aligning with RBI’s push for paperless onboarding.

Expert Opinions

“The removal of minimum balance criteria enhances customer confidence and supports financial inclusion, especially in rural India,”

says Rajesh Verma, Senior Banking Analyst at Motilal Oswal.

“With revised FD rates, Canara is balancing inclusion with profitability — a smart hybrid strategy,”

adds Meena Rao, former SBI executive.

The Bigger Economic Picture

In the backdrop of global uncertainty and domestic liquidity fluctuations, Indian banks are under pressure to attract stable deposits.

Canara Bank’s dual strategy — remove barriers to entry + reward long-term deposits — aligns with India’s macroeconomic goals:

Encourage savings,

Support small borrowers, and

Boost capital adequacy in public-sector banks.

As the RBI maintains a steady repo rate, FDs have once again become a favored option for low-risk investors seeking stable returns.

Security & Digital Banking Push

Canara’s modernization drive goes beyond policies. The bank has rolled out:

AI-driven fraud detection systems,

Biometric login support,

24×7 UPI and IMPS transaction capabilities, and

Integration with popular fintech platforms for easier payments.

By combining inclusivity with technology, Canara Bank is positioning itself as a digitally agile PSU leader.

Conclusion: A Step Toward Inclusive Prosperity

Canara Bank’s removal of minimum balance requirements and its upward revision of FD rates reflect a thoughtful balance between social responsibility and financial innovation.

For customers, this means more freedom, better returns, and reduced stress.

For the Indian banking sector, it sets a precedent — proving that profitability and inclusivity can coexist.

Whether you’re a student, pensioner, or working professional, Canara’s policy shift ensures that your banking experience in 2025 will be simpler, fairer, and more rewarding.