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Difference between Callable and Non-Callable Fixed Deposits

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Callable and Non-Callable Fixed Deposits

Know more on Callable and Non-Callable Fixed Deposits

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 Fixed Deposits. 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 crore. 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.

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6 COMMENTS

  1. Both the fixed deposit schemes are good in there own way, but the non-callable one has a negative point. In callable fixed deposit – the early withdrawal of money from fd is good but the charging of penalty should not be there. As the situation of the person should also be considered.

    In the non-callable one its good that one cant withdraw the money till maturity but bank should allow costumer to withdraw half of the maturity money at-least so that if the costumer is in need he can have some help, and later on submit the money to the bank of continuing fd with the half money.

  2. Is there a compulsory bifurcation of bank fixed deposits across all the banks? The last time I went to my local bank to put my money into FD, no such provision was put forth in front of me, neither orally nor was it mentioned anywhere in the bank FD form. And how much is the penalty which a bank levies on prematurity withdrawal? Alo, if the bank goes bankrupt, how much does the owner of non-callable FD recieve? (Generally it is Rs. 1 lac or bank FD amount, whichever is low)

  3. This article vividly describes the difference between the two types of FDs. But i feel that the penalty part is a bit harsh, after all it is the person’s money who has deposited it in as FD. So before charging the penalty the bank should consider the circumstances under which the person is emergently withdrawing the money. Keeping this in mind, i think the callable FD or non-callable FD is entirely his choice and it should be respected as well.

  4. I never knew that there were to types of fixed deposits. After reading the article I have gained more knowledge on the types of fixed deposits. However, it would have been more beneficial if the author had stated how we can invest in a specific type of fixed deposit- callable or non callable.

  5. As mentioned above, callable fixed deposits are those that can be withdrawn at anytime before maturity. While, on the other hand, non-callable fixed deposits are those that can not be called off before the maturity date. Presently, the difference in rate of interest is negligible but soon the rates will hopefully alter. A great article that lets you know about these concepts.

  6. Fixed deposits have become an integral part of our savings. Be it callable or non callable fixed deposits both can be choosen as per requirement. But with money matters a lot of planning is involved. While callable FD’s involve penality before maturity which is harsh. Non- callable FD’s are fill it and forget it.

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