What is a Callable Fixed Deposit?

A callable fixed deposit allows you to withdraw the invested amount before maturity. This can be done either fully or partially. Such withdrawals may attract penalty charges. This may range from 0.5% to 1%, depending on the issuer's policies. This is then deducted from the FD interest rate offered by the bank or NBFC. In this case, the yield will be lower than previously expected. But it gives you the opportunity to enhance your liquidity. 

 

Investing in this type of deposit also offers flexibility in terms of tenor options. This allows you to choose a convenient timeline that best suits your financial needs.

Features and Benefits of Callable Fixed Deposits

Callabe FDs bridge the gap between the potential earnings offered by regular fixed deposits and the flexibility offered by open-ended investments. Here is why a callable fixed deposit stands out as an Read Moreattractive investment option for some: Read Less

Increased Liquidity

Option to access deposited funds before the maturity, helping you manage urgent needs. While there may be some penalty fees involved, it allows you to quickly meet expenses during financial emergencies Read More. It also could prevent the additional strain of applying for a personal loan, which usually comes at higher interest than the penalty charge. Read Less

Flexible Tenor Options

Choose an investment duration that aligns with your financial objectives. You can choose from tenors ranging between 7 days and 10 years, depending on the issuer. Investing in an FD with a longer tenor Read More also helps you benefit from compounding interest. Read Less

Lower Deposit Amount

Start investing with a small amount instead of a large sum. Some issuers may allow you to deposit as little as ₹1,000, but this may vary depending on their policies. This flexibility allows different t Read Moreypes of investors to take advantage of this investment tool. Read Less

Callable Fixed Deposit Interest Rates

Here is an overview of callable deposit interest rates from some of the leading issuers for a tenor of 5 years: 

Bank/NBFC/HFC

Non-senior Citizen (p.a.)

Senior Citizen (p.a.)

Bajaj Finance Ltd.

8.10%

8.35%

PNB Housing Finance Ltd.

7.60%

7.80%

Mahindra Finance Ltd.

8.10%

8.35%

HDFC Bank

7.00%

7.50%

ICICI Bank

7.00%

7.50%

Axis Bank

7.00%

7.75%

IndusInd Bank

7.25%

7.75%

Disclaimer: The above rates are subject to change at the issuer’s discretion.

How Callable Fixed Deposits Work

All FDs with a premature withdrawal facility are classified as callable FDs. These were the only FDs offered before the RBI introduced non-callable FDs in 2015. Here is how they operate:

  • You invest a lump sum amount for a predetermined period of up to 10 years, depending on the bank or NBFC

  • The issuer will offer interest based on the prevailing rates at the time of booking

  • You could opt for recurring payouts to receive the interest at regular intervals

  • In case you withdraw the investment before the tenor ends, the issuer may charge a penalty

  • The penalty may result in a lower interest rate

Who Should Consider Investing in Callable Fixed Deposits

These FDs are suitable for several types of investor, especially if you prioritise the stability of returns and flexibility. Consider investing in these instruments if you:    

  • Seek Liquidity

You could invest in these FDs if you want to maintain liquidity. This may come in handy during times of a cash crunch or financial emergency. 

  • Have a Smaller Investment Amount

Unlike non-callable fixed deposits, these deposits have lower entry points. This makes a callable FD more accessible for you if you have a smaller lump sum amount to invest. With its optimal interest rates, you can see your investment amount grow over time.

  • Anticipate Rising Interest Rates

Callable FDs could be used to your advantage if you believe that interest rates may rise in the near future. Once the rates go up, you can withdraw the amount prematurely. This allows you to leverage the higher rates for better returns. 

  • Want to Diversify Your Portfolio

If you want access to funds while earning a fixed income, these FDs may prove to be a valuable addition. Unlike market-linked tools, these are low-risk investments.

Eligibility Criteria to Invest in a Callable Fixed Deposit

Here are some common eligibility requirements to book a callable FD:  

  • Resident and non-resident individuals

  • HUFs

  • Sole proprietors

  • Partnership firms

  • Trusts

  • Companies

  • Minors (through parent or guardian)

Things to Consider When Investing in Callable FDs

It is crucial to evaluate a few factors before investing in a callable fixed deposit. This could help you get maximum returns. Here are some points to keep in mind:

  • Compare the rates from different issuers to secure the highest rate and returns

  • Estimate your returns with the help of an FD calculator to ensure you get the desired maturity amount

  • Check the credibility of the issuer to keep your investment protected

  • Choose cumulative FDs to leverage the compounding power and get better returns

  • Avoid premature withdrawal of fd, which can lower the overall returns

  • Understand the tax implications and adjust terms to lower your tax liability

Conclusion

Before investing in a callable fixed deposit, do your due diligence to ensure you get the desired returns. On Bajaj Markets, you can browse FDs from some of the leading banks and NBFCs. The process is simple and can be completed entirely.

Frequently Asked Questions

What is a callable FD?

Callable FDs are regular FDs that allow premature withdrawals. You could withdraw the funds either partially or wholly before the end of the tenor.

What are the disadvantages of investing in callable fixed deposits?

If you decide to withdraw funds before the end of the tenor, the issuer will levy a penalty on the interest earned.

How are callable deposits different from non-callable FDs?

Callable FDs allow you to withdraw funds from the deposit before maturity. Whereas, non-callable FDs do not offer this option.

Which is better, callable or non-callable FDs?

The choice between these two instruments typically depends on your investment horizon and need for liquidity. If you can hold the sum for a longer duration, non-callable fixed deposits may be more beneficial. This is because they offer higher returns compared to callable deposits.

Can an individual open a callable fixed deposit account?

Yes, an individual above the age of 18 years can invest in a callable fixed deposit.

What is the minimum amount of investment in callable fixed deposits?

The minimum investment amount depends on the issuer. This amount is usually lower than the requirement for non-callable FDs.

What is the meaning of a callable deposit?

This type of FD allows you to withdraw funds partially or entirely before the maturity date.

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