City Union Bank's 7.25% on 555-day FDs tops the list: what savers should weigh

City Union Bank is offering the highest rate among the banks compared for 555-day fixed deposits, at 7.25%, according to reporting by Business Today. The same report lines up rates from five other banks for the same tenure. For savers, the takeaway is that this unusual tenure, just over 18 months, is where several banks are currently competing for deposits.

If you have money you will not need for about a year and a half, the 555-day deposit is worth comparing against standard one-year and two-year options. The difference between the top rate and the rest of the pack is modest in rupee terms, so the decision should rest on safety, access to your money and tax as much as on the headline number.

This article explains what a 555-day FD is, why banks run such tenures, what 7.25% actually earns on a real deposit, and how to compare offers without being misled by a single rate figure.

Key takeaways

• As reported by Business Today, City Union Bank tops the 555-day FD rate comparison at 7.25%, ahead of five other banks in the same list.
• A 555-day tenure is a special-scheme tenure, and banks can change or withdraw such rates at short notice.
• On ₹5 lakh, a 7.25% rate earns roughly ₹57,700 over 555 days with quarterly compounding; each 0.25 percentage point of rate difference is worth about ₹2,000.
• FD interest is taxable at your slab rate, and TDS applies once interest crosses the annual threshold at a bank.
• Deposit insurance covers up to ₹5 lakh per depositor per bank, so large sums should be spread across banks.
• Check premature withdrawal terms before booking; an early exit penalty can wipe out the rate advantage.

What is a 555-day fixed deposit?

A fixed deposit locks your money with a bank for a set period at a rate fixed on the day you book it. Most banks publish rates for standard tenures such as 7 days to 10 years. A 555-day deposit is a special tenure, roughly one year and six months, that a bank offers as a limited-period product, sometimes with a slightly higher rate than the standard tenures on either side of it.

Banks create tenures like this for a simple reason: they want to attract deposits of a particular duration without raising rates across the entire rate card. By offering a bump on one tenure, they raise the cost of funds only for the money that comes in through that door. For the saver, the special rate is a real benefit but it also comes with conditions that are worth reading. The rate is often available only for a fresh deposit, it may have a minimum amount, and the scheme can be pulled at short notice.

The Business Today report puts City Union Bank at the top at 7.25% among the banks it compared. Since the headline is all the source gives us, the article does not assume the other five banks' figures or whether the rates refer to regular or senior citizen customers. When you check a bank's own rate card, read the fine print on category and payout option.

How much does 7.25% actually earn?

Rate headlines are easier to understand in rupees. Take a deposit of ₹5 lakh held for 555 days, which is about 1.52 years. Most banks compound FD interest quarterly on a cumulative deposit, which means interest is added to the principal every three months and earns interest itself.

Using quarterly compounding, the approximate outcomes look like this. These are illustrative calculations from standard formulas, not quotes from any bank.

Rate (per annum)	Approx. maturity on ₹5 lakh	Approx. interest earned	Gap vs 7.25%
7.25%	₹5,57,700	₹57,700	-
7.00%	₹5,55,650	₹55,650	about ₹2,050 lower
6.75%	₹5,53,565	₹53,565	about ₹4,150 lower
6.50%	₹5,51,500	₹51,500	about ₹6,200 lower

The table shows why the headline matters less than it seems. Moving from 7.00% to 7.25% adds roughly ₹2,000 on ₹5 lakh across almost 18 months. That is worthwhile for an idle lump sum but it is not a reason to take on inconvenience, extra risk, or a lockup you do not want.

If you choose a payout option, such as monthly or quarterly interest instead of cumulative, the bank pays a slightly lower effective yield because interest is not being reinvested. Retired savers who need regular income often accept that trade, but compare the effective yield, not only the quoted rate.

To run your own numbers, use the EMI calculators for the general idea of how compounding works, or compare rate tables on the interest rates page.

How to compare 555-day FD offers step by step

When a comparison list of six banks appears, resist picking the top rate immediately. A short checklist will keep you from overlooking something that matters more than a quarter of a percentage point.

1. Confirm the customer category. Check whether the rate shown applies to regular customers or senior citizens. Senior citizens typically get an additional premium, so a senior rate at one bank may not be comparable to a regular rate at another.
2. Check the deposit type. Cumulative and payout FDs give different effective yields. Compare like with like.
3. Read the premature withdrawal terms. Ask what penalty applies if you close the deposit early and whether partial withdrawal is allowed.
4. Verify the minimum and maximum amounts. Special-tenure schemes often have a floor, and some cap the deposit size.
5. Look at the validity date. A limited-period scheme may end on a date that has passed by the time you visit the branch or app.
6. Calculate the post-tax return. A higher rate is worth more to someone in the 5% or 10% bracket than to someone in the 30% bracket, in relative terms, because the tax bite is proportionally larger for the latter.

Doing these six checks takes about twenty minutes and can save you from booking a deposit that looks best on paper and worst in practice.

Who benefits from a 555-day FD and who should skip it

The deposit suits people whose money has a clear time horizon of around 18 months and who value certainty over the chance of higher returns elsewhere.

Who benefits

• Retirees with a lump sum from a maturing deposit or a retirement payout who want predictable income.
• Households setting aside money for a planned expense in about a year and a half, such as a school fee block, a home down payment top-up or a wedding.
• Conservative savers who want to lock in a rate before the rate cycle eases further.

Who should think twice

• Anyone who may need the money within a year. An early exit penalty can cost more than the extra rate.
• Emergency funds. These belong in a savings account, sweep FD or liquid instrument where access is instant.
• People in the highest tax bracket, who may find that tax-efficient options fit better after tax. That is a personal calculation, so consult a tax adviser if the sum is large.

If you need money quickly but do not want to break an FD, some banks offer loans against fixed deposits at a small spread over the FD rate. Compare that cost with a personal loan before deciding, since a personal loan will usually be pricier.

Tax, TDS and deposit insurance you should know

Interest on a fixed deposit is taxable as income from other sources at your slab rate. The bank deducts TDS at 10% when the interest paid or credited at that bank in a financial year crosses the threshold, which is ₹50,000 for most depositors and ₹1 lakh for senior citizens under current rules. If your total income is below the taxable limit, you can submit Form 15G, or Form 15H if you are a senior citizen, to avoid TDS. If TDS is deducted wrongly or exceeds your liability, you claim it back while filing your return.

A 555-day deposit straddles at least two financial years, so the interest accrues across years. For a cumulative deposit, banks generally compute and report the accrued interest each year for tax purposes, even though you receive the money only at maturity. Many savers forget this and are surprised by a tax entry for interest they have not yet received.

On safety, deposits in banks are covered by the Deposit Insurance and Credit Guarantee Corporation, up to ₹5 lakh per depositor per bank, covering principal and interest combined. This limit applies across all your accounts and deposits in the same bank in the same ownership capacity. If you are placing a larger amount, splitting it across two or more banks keeps every rupee inside the insured limit. You can read more on the DICGC website.

Common mistakes when chasing the highest FD rate

• Comparing quoted rates instead of effective yields. A payout FD at 7.25% does not yield what a cumulative FD at 7.25% does.
• Ignoring the bank behind the rate. A small difference in rate is not compensation for an institution you are not comfortable with. Check the bank's financial standing and regulatory record.
• Putting all your savings in one deposit. A single large FD at one bank breaks both the insurance limit and your liquidity.
• Booking a ladder of identical maturities. Staggering maturities across 6, 12 and 18 months gives you access to cash at intervals and reduces the risk of reinvesting everything at a low rate on one date.
• Forgetting the reinvestment question. In 555 days the rate environment may look different. Decide now what you will do at maturity rather than letting the deposit auto-renew at whatever rate applies then.

For more coverage of bank rate moves, see the news hub.

Frequently asked questions

Which bank offers the highest 555-day FD rate?

According to reporting by Business Today, City Union Bank tops the comparison at 7.25% for 555-day deposits. The report also lists five other banks. Rates change frequently, so confirm the current figure with the bank before booking.

Is a 555-day FD better than a two-year FD?

Not necessarily. A 555-day deposit is a special tenure and may carry a higher rate than its neighbours on the rate card, but the two-year rate can be close or higher at some banks. Compare the effective yield for the specific period you can lock money away.

Is my money safe in a bank FD?

Deposits in banks are insured by DICGC up to ₹5 lakh per depositor per bank, including principal and interest. Amounts above that are not covered by the insurance, so spread larger sums across banks and choose institutions you are comfortable with.

Will I pay tax on the interest?

Yes. FD interest is added to your income and taxed at your slab rate. The bank deducts TDS once interest at that bank crosses the annual threshold, unless you submit Form 15G or 15H where eligible.

Can I withdraw a 555-day FD early?

Most banks allow premature withdrawal but charge a penalty, often a reduction in the interest rate applicable to the period the deposit actually ran. Check the specific terms before booking, especially if there is a chance you will need the money before maturity.