Non-Callable Fixed Deposits: Benefits and Limitations Explained

Fixed Deposits have long been a popular choice for investors looking for stable returns with minimal risk. In 2015, RBI introduced a new type of FD, non-callable Fixed Deposits. These bank deposits are strikingly different from regular or callable Fixed Deposits in terms of interest rates, liquidity, and minimum deposit amount, among others. Let's understand what non-callable FDs are and whether you should book one.

What is Non-Callable Fixed Deposits?

A non-callable fixed deposit is a type of fixed deposit that comes with a pre-determined lock-in period. Unlike callable FDs, non-callable FDs don't allow premature withdrawal of funds. However, such FDs offer higher interest rates compared to regular Fixed Deposits. 

The minimum deposit required is ₹2 crore while the maximum deposit amount is capped at ₹5 crore. Other than Indian investors, NRIs (Non-resident Indians) are eligible to open non-callable FDs, however, the deposit should be below ₹2 crore.

Features and Benefits of Non-Callable Fixed Deposits:

1. Higher Interest Rates

Non-callable fixed deposits offer higher interest rates compared to callable FDs, making them an attractive investment option for those looking to maximise their returns. 

2. Short-term Growth

Non-callable FDs generally come with a maturity period ranging from 1 year to 2 years. This allows investors to park and grow their money in a short span of time.

3. Accessibility Beyond Borders 

Other than resident Indians, NRIs are also eligible for non-callable fixed deposits. This benefit expands the potential of FD and allows investors across borders to invest in FD and grow their wealth.

4. Multiple Interest Pay-out Options

You can enjoy interest pay-outs monthly, quarterly or at maturity based on your preference. Periodic interest pay-outs could be beneficial for investors looking for a regular source of income.

Disadvantages of Non-Callable Fixed Deposits

1. Lack of Liquidity

Non-callable Fixed Deposits do not allow premature withdrawal before maturity, limiting access to funds during the deposit term. However, there can be certain exceptions where premature withdrawals are allowed. Kindly check with your bank for better clarity.

2. Minimum Deposit Requirement 

As per the Reserve Bank of India (RBI) mandate, the minimum deposit requirement for non-callable FDs is capped at ₹1 crore. The high deposit amount requirement makes it difficult for regular investors to open such Fixed Deposits.

3. Auto-Renewal Not Allowed

You don't have the option to auto-renew your FD once it matures. The principal amount along with the interest gets directly credited into your account upon maturity.