In these days, every ordinary bank holder is familiar with the terms fixed deposit and recurring deposit. Fixed deposits are further divided into two types: callable and non-callable. The non-callable fixed deposit was proposed by RBI in the recent Monetary Policy Statement for the year 2014-15. Lets us now actively understand the differences between callable and recently launched, non-callable fixed deposit.
Why FD?
Let us first study the characteristics of Fixed Deposits (FD) and why does it attract every general bank holder to invest in it.
You can deposit in FD in varying amounts in less or more Rs. 1 core. Whatever the amount it is, you will earn interest on the current rate of interest offered by the bank.
You can earn interest on the basis of tenure of your fixed deposit. And note it, if the tenure of your FD is higher, than you will definitely earn higher interest rate.
If you are a senior citizen, then you will earn higher rate of interest. Banks respect senior citizens and offer higher rates of interest for them. And if you are young, then don’t worry. You have an avenue open for investing in your old age for your dear children and grandchildren.
If fixed deposit is closed before it actually matures, then bank will charge certain amount of penalty. So, it is always better if you forget the FD thing until the maturity date.
Callable Fixed Deposits – Get me any time
As the name suggests, you can withdraw these FDs during any crucial situation prior to the maturity date. For example, you need money for an emergent medical condition of your family member, and then you can withdraw the FD amount. These kinds of FDs do not have lock-in issue. But don’t forget that you have to pay penalty for withdrawing prior to the date of maturity.
Non-callable fixed deposits – Wait till the right time
You must have understood the meaning of the word ‘calling’ in the banking domain. Yes, it means withdrawing of the FD from the bank. Non-callable deposits are such that you cannot withdraw it till the date of maturity. The amount is locked in the FD till the completion of maturity date.
This FD is available for deposits of higher amounts. Banks also offer comparatively higher rate of interest on non-callable fixed deposits. Suppose, you don’t need cash amount of Rs.20, 00,000 for further period of two years and you don’t want to spend it in random expenditures or shopping. Then, you can surely invest your money in this type of FD. Your money will be safe, secure and locked in the bank. Most importantly, you will not be tempted to spend you cash.
The non-callable FD is also vital for banks to maintain their issues of asset-liability management. Thus, the initiative of non-callable fixed deposit is beneficial for the bank as well as the bank holder in cash management.
