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What are callable fixed deposits?

By Finserv MARKETS - Aug 27,2019
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Introduction

You all are aware that a fixed deposit is an amount being deposited in a bank carrying certain percentage of interest. The amount invested in fixed deposits is normally kept with the bank for a predetermined period of time. Normally they can be withdrawn prior to maturity date.

 

What are callable fixed deposits?
 

The fixed deposits currently offered by banks are callable fixed deposits. In this, you can withdraw the FD amount anytime before maturity and banks charge some penalty for this. But the advantage on the other hand is that there is no lock-in period for such FDs and you can get your amount deposited immediately most of the time. Interestingly, ‘calling an FD’ means the depositor is calling his FD for withdrawal. Contrary to this, non-callable fixed deposits are similar to callable FDs but the major difference is that a non-callable fixed deposit cannot be withdrawn or closed before maturity. These are completely locked and the depositor has no authority to close it prematurely.

 

What are callable fixed deposits?

Source: ET

The Reserve Bank of India had launched instruments like non-callable and callable Fds to avoid the serious problem arising in asset and liability management of banks. With the consecutive rate cuts and the RBI’s push to address the credit crunch in the country, it is likely that the interest rates on bank deposits are going to decline further.

Bank deposits provide you with the highest level of safety of your principal amount while also giving you guaranteed returns. It ensures capital protection as well as a uniform flow of income.

Unlike non callable fixed deposits, callable FDs demands less amount to be deposited as minimum balance. It has a few drawbacks which are as follows:

  • Rate of interest earned by callable fixed deposits is lower when compared to non callable fixed deposits.
  • They are not a stable source of money to the bank and that is why they are not of any advantage to banks.
  • As mentioned earlier, banks charge an amount of money as penalty for premature withdrawal.

If you delve into a non callable FD, you will know that it earns much more interest than callable fixed deposits. They are considered as a stable source of funding to the banks and they enable the bank to have a good asset liability management system.

On the other hand, if you need money in case of any emergency, you won’t be able to withdraw from non callable fixed deposits, as they are not liquid instruments. That’s when you will be needing a callable FD. Also, funds of the investor will be blocked for the predetermined period. If the investor who bought this non callable fixed deposits having a maturity period of 4 or 5 years and in the 2nd year he found a great investment opportunity where he could certainly make better returns than the interest given by the bank, there will be a loss of possible returns. Minimum amount of making a deposit is very high. So it’s not accessible to wide class of people who can’t deposit such a huge amount.

Overruling everything above, these are appropriate for those who don’t want to bear any risk along side of earning a stable rate of interest without any requirement for cash before it gets matured.

 

What are callable fixed deposits?
At present, Indian banks are allowed to offer differential rates of interest on deposits on the basis of tenure for deposits less than Rs 1 crore and on the basis of quantum for deposits of Rs 1 crore and above. Banks are, however, not permitted to differentiate on the basis of any other parameter of the deposit contract.

Open a fixed deposit account on Finserv MARKETS. All you need is to fill in your personal details along with your nominee’s, choose the amount to invest, tenure and the type of fixed deposit (cumulative or non-cumulative). With minimal documents required, the validation and verification process is also seamless and expeditious. To make it easier for you, it also provides you the option to keep track of your investment on your smartphone anytime, anywhere.

Conclusion

Investing in secure tools like fixed deposits should be on every adult’s financial planning agenda. Innovative products like Bajaj Finance Fixed Deposit available on Finserv MARKETS offers you a hassle-free process online with minimal documentation and lucrative interest rates. Fixed deposits with non-banking institutions like Bajaj Finance Fixed Deposit available on Finserv MARKETS can fetch you a higher rate of interest of upto 8.95% every year, making it more appealing than a regular fixed deposit in a bank.

 

Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522