Understanding Callable Fixed Deposits (FDs): Features and Benefits Explained

When it comes to investing, individuals often seek safe and predictable options to grow their savings. Fixed Deposits (FDs) have long been a popular choice in the realm of financial investments, If you've been an FD investor.

you may have come across the term Callable Fixed Deposits. In this guide, we have explored the concept of callable FDs, shedding light on their features and benefits. 

Understanding Callable FDs: Unveiling the Basics 

Callable fixed deposits are Fixed Deposits that allow investors to withdraw partial or entire deposit amount before maturity. Such FDs don't come with a lock-in period. However, banks may charge a certain penalty fee for early withdrawal. The penalty fee can be up to 1% on interest. However, check with your bank for better clarity on the fees and charges levied on early withdrawals. 

Benefits of Callable FDs: Why Consider Them? 

1. Better Liquidity

If you're in need of urgent funds and your last resort in breaking your FD, in such situations callable FDs may help. Callable FDs allow premature withdrawals albeit at a certain cost in the form of penalty fee. This provides a safety net for depositors seeking quick access to funds during crunch situations.

2. Flexible Deposit and Tenure

Callable FDs offer flexibility in terms of tenure and deposit amount. You can choose the investment duration and amount as per your financial goals. The interest rate remains fixed throughout the deposit tenure allowing you to enjoy higher returns at the time of maturity.

3. Diversification of Investment Portfolio 

Such FDs can help diversify your investment portfolio. Investors can spread liquidity options through callable FDs, which may help them get quick access to funds during financial emergency. 

4. Low Investment Requirement 

For most callable FDs, the investment amount starts from ₹1,000. This allows investors from different income strata to invest in such FDs and build a financially secure future. Kindly check with your bank regarding the minimum deposit amount for better clarity. 

5. Higher Interest Rates 

Callable FDs offer higher interest rates compared to Savings Accounts. Investors can significantly maximise their savings with Callable FDs. Though the option of early withdrawal is available, it's recommended not to break your FD so that you can enjoy maximum returns at the time of maturity.

6. Opportunity for Tactical Investment Moves 

Callable FDs provide investors with an opportunity to make tactical investment moves based on market conditions and interest rate outlook. The early redemption possibility allows investors to capitalise on favourable trends or adjust their investment strategies accordingly. 

7. Unaffected by Market Volatility

Similar to any other FD, callable FDs are not market-linked products. The interest offered remains fixed throughout the deposit tenure till maturity. However, for early withdrawals, the penalty fee may have an impact on your expected interest income.