Fixed deposits, also known as FDs, have long been the preferred choice for investors looking to grow their savings in a safe and reliable manner. The introduction of callable and non-callable FD options from banks and other financial institutions is providing investors with more strategic investment opportunities based on their needs and goals. However, before investing, it’s important to understand which of these two is the best choice.
What is callable bank FD?
Callable fixed deposits, also known as regular FDs, allow investors to withdraw part or all of the amount before the maturity date. However, banks and Non-Banking Financial Companies (NBFCs) may impose fines or penalties for premature withdrawals. This flexibility is the unique feature of this scheme.
Features and benefits of Callable FDs
The biggest advantage of callable FDs is that they allow premature withdrawals if needed. Although penalties apply, they serve as a safety net for emergent financial needs. The investment tenure and amount in callable FDs can be chosen according to your financial plan. Although interest rates may be lower, the flexibility compensates for this. The minimum investment amount in these FDs is relatively low, allowing even small investors to easily invest and diversify their portfolios.
What is a non-callable Bank FD?
A non-callable fixed deposit is a safe investment scheme in which the deposit is locked in for a fixed period. Premature withdrawals are not permitted. The initial investment amount is usually higher, but in return, it offers attractive and higher interest rates.
Features and Benefits of non-callable FDs
The biggest advantage of non-callable FDs is that the investor is guaranteed to receive the full amount at maturity, along with higher interest, which can be higher than that of callable FDs. Premature withdrawals from these FDs are possible only in very limited circumstances, such as the account holder’s death or bankruptcy. This ensures the investment is secure. The investment remains locked in for a fixed period, ensuring the capital remains safe and grows at a steady rate.
Callable or non-callable FDs
Non-callable FDs generally offer higher interest rates because the amount is locked in for a fixed period. However, the interest rate may be slightly lower due to the premature withdrawal feature in callable FDs. According to Axis Bank, if the investor anticipates future financial needs, a callable FD may be a better option. On the other hand, non-callable FDs are more suitable for investors who aim for safe and stable returns over the long term.
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