FD Auto-renewal

When your Fixed Deposit (FD) matures, you can choose between cashing out your investment or renewing the scheme. Instead of keeping your funds idle, reinvesting the capital and the interest for continued earnings can often be the right move. 

 

This is where auto-renewal of FDs comes in. Through this seamless and hassle-free facility, banks and NBFCs allow you to automatically reinvest the amount upon maturity without any intervention.

FD auto-renewal occurs when the banks and NBFCs facilitate the new cycle of investment for the funds after a deposit matures. You can opt for this facility either at the initial stages of investment or at any point during the lock-in period.

 

The FD auto-renewal interest rate may either be the current rate at the time of renewal or the previous rate. Check this when you choose this facility to be better informed. The duration is generally the same as the previous fixed deposit.

Renewing your FD is a straightforward process. Here are common methods:

• Auto-renew FD

You can select the auto-renewal facility either when making the FD investment or anytime during the investment term. Banks or NBFCs will only renew it automatically if you provide standing instructions.

• Visit the Bank or NBFC’s Office

A traditional yet effective method is visiting the branch where you have opened the FD account in person. Speak to a representative who will guide you through the renewal process and fill out the necessary forms.

• Online FD Renewal

Many issuers offer online facilities for FD renewal. Log in to your account, locate the FD section, and follow the steps to renew your deposit digitally.

• Use Mobile Apps

If your bank or NBFC has a dedicated mobile app, check for FD renewal options. Most apps provide a user-friendly interface for managing your deposits on the go.

A simple oversight in renewing your fixed deposit can lead to certain financial implications. It can result in you missing out on continued interest earnings. Take a look at two possible scenarios:

• FD Auto-Renewal (If Opted)

If you have opted for auto-renewal, your FD will automatically renew for the same tenure at the prevailing interest rates. This ensures your funds continue to grow without any disruption.

• Conversion to Savings Account

In some cases, if you forget to renew and have not opted for FD auto-renewal, the bank credits the matured FD to your savings account.

The auto-renewal feature is advantageous for both parties. For customers, it enhances convenience and lets you maximise your savings without any gaps.

 

For banks or NBFCs, it improves customer experience and engagement, helping to strengthen long-term relationships. In addition, it makes the financial institutions’ administrative tasks more efficient and cost-effective. 

While an auto renewal of the FD facility saves you time and effort, ensure that you factor in certain pointers.

• Financial Goals

Make sure the selected investment duration aligns with your financial objectives. If your goals have changed, consider adjusting the tenure accordingly.

• Interest Rates

Evaluate the current interest rates at the time of renewal to determine if it is the right choice for your corpus. 

• Liquidity Needs

Auto-renewal locks in funds for the same duration as the original deposit. If you need access to your funds at a specific time, consider whether auto-renewal suits your liquidity requirements.

• Tax Implications

Check whether you will need to pay any taxes on the returns of your renewed FD. This is especially crucial if you are utilising tax benefits under Section 80C of the Income Tax Act of 1961.

To maximise your benefits, understanding the FD renewal rules and withdrawal terms is crucial. These include: 

• Withdrawal

When a term deposit matures, you can choose to withdraw both the initial amount you invested and the interest earned.

• Premature Withdrawal

This is when you withdraw your deposit before it reaches its maturity date. Note that some financial institutions might charge a premature withdrawal fee for this facility. This may also result in interest loss as the rate may also be adjusted for a shorter tenure.

• Auto-Withdrawal

It is when the bank/NBFC automatically deposits the total amount into your savings account at the end of the deposit term.

• Renewal

When your deposit matures, you can choose to renew it for the same investment duration. This way, you continue the cycle and keep earning interest on the deposited funds.

• Auto-Renewal

Consider that you have given standing instructions to the financial institution holding your FD. In this case, your deposit will be automatically renewed for the same term at the current interest rate. 

If you are going ahead with an auto-renewal of your FD, make sure the maturity and other terms match your investment goals. If you see other financial institutions offering better rates, you can switch to manual FD renewal and reinvest your corpus elsewhere. 

 

Compare FD rates from reputed banks and NBFCs on Bajaj Markets and book your FD easily online.