As of 2015, in the RBI 6th Bi-Monthly Monetary Policy Statement, a different variation of Fixed Deposit (FD) was announced known as Non-Callable Bank Fixed Deposits (FDs). According these guidelines, Axis bank, one of the leading private banks in India, launched the first non-callable fixed deposit scheme for its customers. To understand what this new concept is, it is essential that we understand what a callable fixed deposit is so that we can differentiate between the two. We can also take a look at their pros and cons which would ensure that you can make an informed decision when choosing either.
What are Callable Fixed Deposits?
A fixed deposit is generally a deposit scheme where an amount or the whole amount can be withdrawn by the account holder prior to the maturity date of the deposit. In other words, all the fixed deposits which allow premature withdrawals are called as callable deposits. Banks may charge some amount of money as penalty for withdrawing the amount before maturity. However callable fixed deposits do not have any lock in period.
Prior the launch of non-callable fixed deposits were announced all fixed deposit schemes in India were callable.
Benefits of Callable Fixed Deposit
The high liquidity factor about the callable FD schemes are the most advantageous considering that you can withdraw money from your deposits so far, regardless the minor penalties.
The minimum amount for deposits is always lower when compared with the alternative FD option introduced recently.
Disadvantages of Callable Fixed Deposit
There are certainly some major disadvantages of callable fixed deposit, which is why perhaps the alternative has been introduced:
In the case of withdrawing money prior the maturity dates, bank charges penalties for taking out your own money from the deposited money till date.
The interest rates earned by callable fixed deposits is much lower against non-callable fixed deposits.
They are not a sustainable source of money for the bank in which case banks do not entertain customers too much, about fixed deposits.
What are Non- callable fixed deposits?
Non-callable fixed deposits simply don’t have any lock in period. The amount that an investor invested in this product can’t be withdrawn prior to the date of maturity with the exceptions that include Bankruptcy of the account holder, winding up of business, orders by, in the case of death, etc. Also, the minimum amount for the deposits are supposed to be much higher compared to callable deposits. They have a higher premium rate of interest since the funds are blocked for the period of maturity.
Benefits of Non-Callable Fixed Deposit
These schemes are more rewarding when it comes to being paid higher rate of interest on their principal deposit amount.
The schemes are said to be a far more stable source of funding to the banks as they can hold the money up to the maturity date.
They also allow the bank to have a well-established and thriving asset liability management system.
Advantages of Non-callable fixed Deposits
There are disadvantages of non-callable fixed deposits as well, which are as follows:
Under emergencies where you might be in dire need of the money, it is blocked. The extreme cases of emergencies occur rarely that do allow withdrawal, else the deposited money cannot be touched. Hence, this instrument can be barely liquidated.
Funds of the depositor are blocked for the predetermined period. If the depositor who bought this non-callable fixed deposits having a maturity period of 5 years and in the second year he or she found a better investment opportunity where he or she can certainly make better returns than the interest given by the bank through the non-callable fixed deposit.
Minimum amount of deposits is very high hence limiting this opportunity only a restricted class of people who can deposit such a lump sum amount.
Features of Axis Bank Non-callable Fixed Deposits
The first bank to introduce a non-callable fixed deposit scheme is Axis Bank. Here are the features of the product:
The minimum amount of deposit is Rs. 15,00,001.
The product is available to both, residents and non-residential Indians.
Premature withdrawal is allowed only in the case of death or bankruptcy that has been ordered by court.
The maturity period is between 1 year and 2 years maximum.
There is no option for automatic renewal of the scheme.
There is a choice for the investor for the interest to be calculated through simple or compound calculation.
As of November 2015, for 1 year non-callable fixed deposits rate of interest offered by Axis bank is 8.3 % which is not really a greater deal compared to 8.2% of 1 year callable.
Why Opt For Non-callable Bank Fixed Deposits (FDs) or is it worth it?
The important thing to notice is that this type of FD comes with the huge minimum deposit requirement in the case of the Axis Bank which is a minimum of Rs.15, 00,001. Hence, if you have a feeling that your goal is fixed in short periods such as 1 or 2 years and you would not require such money, then you can easily deposit. Otherwise, the high interest rate is not worth it if you may be in trouble of liquidating it.
In addition, you will find that from Axis Bank’s Fixed Deposit Plus that the minimum and maximum tenure is only 1 year and 2 years respectively. Hence, you will not be able to park your cash in such deposit for few months. Also you cannot deposit the amount for more than 2 years to continue warning the interest. The difference between Axis Bank’s normal FD as compared to this Non-callable FD is just 0.10%. Hence, it might not be all that worth after all.
Therefore, if you are not one of those giant investors or who have surplus amount of money to park and which may not be required in the near future i.e. upto a couple of years these fixed deposits are not an intelligent investment.
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I have invested some money as a Fixed deposit in HDFC Bank and the interest rate is not that much great because they are giving interest as compared to others. I have invested the money of Rs. 3L and there is a locking period of 5 years. Its 7% interest rate. If they are increasing the interest rate, it would be fine. Since I do all my transactions with this bank, I have selected same for my FD as well.
I have chosen my fixed deposit scheme from State bank of India because I'm maintaining my salary account with them and they provided rate of interest is fine for me. I have invested the money of Rs. 2.75 lakhs. There is a locking period of 45 days. They are giving interest rate of 4.5%. Overall, I'm satisfied with their services.
I have been investing the money of Rs. 3 lakhs for the fixed deposit. I have selected Kotak mahindra bank for the FD because their net banking facility is very different when i compared to other. I can access everything regarding the account hence its easy to handle the transactions. I'm not sure about the interest rates. 7 months before, i have invested the money.
Its because of the competitive interest rates, i have selected the Fixed deposit in Kotak Mahindra bank. I have invested the fixed deposit 1.5 years ago and there is a lockin period of 5 years. They have invested the amount of Rs. 7.5 % and the employees are helpful in the branch.
I have a Fixed deposit in Axis bank. I have invested the money of Rs. 10000 for two FDs. There is a lockin duration of 1 year. They are giving a interest rate of 7%. Through net banking, i have activated this Fixed deposit. There is no tax benefits available. Axis bank service has been good. Overall, I'm happy about their services.
Since last 15 years, i have a account with Oriental bank of commerce thats the reason i have invested the money in fixed deposit with the same bank. I have invested the amount of Rs. 11 lakhs. They are giving the interest rate of 6.5%. There is no locking period but i have chosen the duration of 1.5 years. There is no additional charges deducted for this fixed deposit.
Interest rate is very low in Indian post office Fixed deposit scheme because they are providing only 8.5%. I have chosen this office because of the child benefits. I have invested the money of Rs. 1.5 years. Its 3 years lock in period. Overall, I'm satisfied with the service provided by post office employees.
I have invested the money in SBI for a fixed deposit and based on my wife recommendation i have chosen it. They are providing the interest rate of 7.25%. They have option to select the lock in period in that i have chosen 5 years. We had visited their branch and the response was good.
Its easy accessible and to redeem so that i have invested the money in Fixed Deposit with HDFC BANK. I have invested the money of Rs. 2.5 lakhs and they have provided me a interest rate of 7.5%. There is no locking period. I didn't got any additional charges till now.
I have paid the money of Rs. 4.5 lakhs as a fixed deposit in the Indian post office. For the safety purpose, i have chosen the post office account. They are offering me a interest rate of 7.9%. There is a lockin period of 5 years. If i withdraw the money in 1 year, they will reduce the interest rate of 2% and after 3 years, its 1%.
Interest rates are less in Central Bank of India so I had taken a fixed deposit. I have invested the money of Rs. 1 lakh in my wife's name. Branch is near from my place so I have chosen this bank. Yearly once, I get the money of Rs. 6,765 for the interest. There is a locking period of 1 year.
I am doing Fixed Deposit with ICICI BANK and its been around 5years. They haven't been paying good interest and its more or less same like other banks as I used to hold my salary account with ICICI, I have decided to be with one bank. There is no locking period and its flexible. They do give good support and the app is user friendly. Even deposit account can be opened through i-mobile or net banking itself.
I had a Fixed Deposit in State Bank of India, I have completed the tenure before 3months ago. I have no issues with the customer service. They are given me 7% interest rate for 2years. There is no profit and processing fee. I got an online access, where I can check the interest rate anytime on the YONO app or else SBI online.
I have invested some money through FD. My salary account is in SBI so i have a zero ATM charges and the limit is not actually set by SBI. They do have short term FDs which is pretty good. I have invested the money of Rs. 60000 and the interest rate is 10.01% for the tenure period of 16 months. There is no lockin period. There is no hassle to getting the money back.
I have invested the money in Dena bank through Fixed deposit and the growth is not that much good. They are not taking any hidden charges. Only because of the Government undertaken bank, i have selected them. They are providing a interest rate of 6% per annum. I have invested the money of Rs. 2 lakhs. There is a lockin period of 1 year.
I have opt for fixed deposit for the tax saving purpose because I have chosen five years tenure with AXIS Bank, still its going on. Only once I Invested my money it has the locking period of five years. I have option to check my transactions through mobile app. But I have concern about the interest rate is very lesser for this FD.
I had fixed deposit with SBI then I withdrawn the amount, I done Rs. 3 lakhs of investment on my daughter name then I taken the liquidity to purchase the land, at the time I struggled a lot to take that money because the process was difficult to withdrawn the money after seven months of tenure.
I had a Fixed Deposit with Union Bank of India and its closed 18 to 19 months due to personal reasons. I am doing investment but my experience is not good with FD account. In my home town, there is no other banks so just decided to go with this bank. The returns are good.
I have one FD with HDFC, I deposited Rs. 1 lakh, I was opt for 45 days of tenure. Finally I got 6.25% of interest for 45 days. It won't cover the tax, if we need tax benefits we should go for five years term. I can track the details through netbanking, on the maturity date the amount credits automatically in the account. Even the notification can customized.
HSBC staff wrongly pre closed my fixed deposit .. and calculated the interest rates wrongly and when asked them for clarification never got back .. even after following up with them repeatedly for more than 3 months.. would highly recommend not using their services.
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A V kumar
Reviewed on Aug 24, 2019