Fixed Deposits (FDs) have long been the go-to investment option for individuals looking for a safe and reliable way
to grow their savings. With the introduction of callable and non-callable FDs, investors are equipped with more
nuanced investment strategies tailored to their specific needs.
What are callable Bank Fixed Deposits (FDs)?
A Callable Fixed Deposit or normal FD offers investors the convenience of withdrawing a portion or the entirety of
their funds prior to the set maturity date. Opting for early withdrawal, however, may attract a penalty from banks
and NBFCs, which is a trade-off for the flexibility such deposits provide.
Features and benefits of a callable Fixed Deposit
Callable Fixed Deposits stand out as a flexible investment option, balancing the trade-off between higher returns and
liquidity management.
- Enhanced liquidity: The standout feature of a callable FD is the option to access your funds
before maturity, which can be crucial in times of financial need. Despite the penalty for early withdrawal, the
ability to liquidate your investment for urgent cash flow provides a safety net.
- Flexibility in investment: Callable FDs may not always offer the highest interest rates, but
they make up for this with significant flexibility. You can choose the duration of your investment and the
amount you wish to deposit, allowing you to align the deposit closely with your financial objectives.
- Low minimum investment requirement: The accessibility of callable FDs is enhanced by the low
minimum deposit requirement, opening up this investment option to a wide audience. Whether you're starting with
a small amount or looking to diversify your portfolio without committing a large sum, callable FDs provide an
entry point for investors of various capacities to benefit from the scheme.
What are non-callable Bank Fixed Deposits (FDs)?
Non-callable Fixed Deposit represents a secure investment avenue where the funds are locked in until the end of the
maturity period without the option for early withdrawal. This type of fixed
deposit often demands a larger initial investment but offers more attractive interest rates in return, as
the capital is guaranteed to remain untouched until maturity.
Features and benefits of a non-callable Fixed Deposit
Non-callable Fixed Deposit offers the dual benefits of investment security and attractive returns, making it an ideal
choice for investors seeking a stable growth path for their savings.
- Guaranteed higher yields: The chief advantage of a non-callable deposit is the assurance of
receiving the full maturity amount, which can result in higher interest earnings than what you might expect from
a callable or normal fixed deposit.
- Restricted withdrawals for enhanced security: In contrast to callable FDs, non-callable
deposits strictly limit withdrawals to extremely rare circumstances, such as the account holder's bankruptcy or
death.
- Locked-in investment: Non-callable FDs require your investment to be fixed for a definite
period. This locked-in approach guarantees that your funds are not only safe but also growing steadily.
Factors to consider when choosing between Callable and Non-Callable FDs
When deciding between callable and non-callable FDs, understanding the difference between callable and non-callable
FD is pivotal to aligning your investment with your financial goals and risk preferences.
Interest rates and returns
Non-callable FDs typically offer higher interest rates compared to callable FDs, as the funds are locked in for the
duration of the deposit without the option for early withdrawal. Conversely, callable FDs may provide slightly lower
interest rates due to their flexible withdrawal features, which can be a trade-off for having access to funds in
unforeseen financial needs.
Liquidity and flexibility
Callable FDs shine in terms of liquidity and flexibility, allowing investors to withdraw their funds before maturity
if necessary, albeit with a penalty. Non-callable FDs lack this flexibility, as they are designed to secure the
investment until the end of its term, offering no room for early withdrawal without facing significant restrictions.
Also Read: Top
5 reasons to open a Digital Fixed Deposit
Investment goals and time horizon
Consider your investment goals and the timeframe over which you intend to achieve them. Non-callable FDs are
well-suited for long-term goals where steady growth is preferred. In contrast, callable FDs may be more appropriate
for short-term investment strategies where flexibility is a priority.
To conclude, when choosing between callable and non-callable FDs, consider your investment goals, time horizon, and
liquidity needs. Non-callable FDs offer higher interest rates but lack liquidity, suitable for long-term goals.
Callable FDs provide flexibility with lower interest rates, more suitable for short-term strategies and unforeseen
financial needs.
Disclaimer: This article is for information purpose only. The views expressed in this article
are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd.
and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader
for taking any financial decisions based on the contents and information. Please consult your financial advisor
before making any financial decision.
