Callable Fixed Deposits

A callable fixed deposit allows you to withdraw the invested amount before maturity. This can be done either fully or partially. Such withdrawals may attract penalty charges. This may range from 0.5% to 1%, depending on the issuer's policies. This is then deducted from the FD interest rate offered by the bank or NBFC. In this case, the yield will be lower than previously expected. But it gives you the opportunity to enhance your liquidity. 

 

Investing in this type of deposit also offers flexibility in terms of tenor options. This allows you to choose a convenient timeline that best suits your financial needs.

Here is an overview of callable deposit interest rates from some of the leading issuers for a tenor of 5 years: 

Disclaimer: The above rates are subject to change at the issuer’s discretion.

All FDs with a premature withdrawal facility are classified as callable FDs. These were the only FDs offered before the RBI introduced non-callable FDs in 2015. Here is how they operate:

• You invest a lump sum amount for a predetermined period of up to 10 years, depending on the bank or NBFC

• The issuer will offer interest based on the prevailing rates at the time of booking

• You could opt for recurring payouts to receive the interest at regular intervals

• In case you withdraw the investment before the tenor ends, the issuer may charge a penalty

• The penalty may result in a lower interest rate

These FDs are suitable for several types of investor, especially if you prioritise the stability of returns and flexibility. Consider investing in these instruments if you:    

• Seek Liquidity

You could invest in these FDs if you want to maintain liquidity. This may come in handy during times of a cash crunch or financial emergency. 

• Have a Smaller Investment Amount

Unlike non-callable fixed deposits, these deposits have lower entry points. This makes a callable FD more accessible for you if you have a smaller lump sum amount to invest. With its optimal interest rates, you can see your investment amount grow over time.

• Anticipate Rising Interest Rates

Callable FDs could be used to your advantage if you believe that interest rates may rise in the near future. Once the rates go up, you can withdraw the amount prematurely. This allows you to leverage the higher rates for better returns. 

• Want to Diversify Your Portfolio

If you want access to funds while earning a fixed income, these FDs may prove to be a valuable addition. Unlike market-linked tools, these are low-risk investments.

Here are some common eligibility requirements to book a callable FD:  

• Resident and non-resident individuals

• HUFs

• Sole proprietors

• Partnership firms

• Trusts

• Companies

• Minors (through parent or guardian)

It is crucial to evaluate a few factors before investing in a callable fixed deposit. This could help you get maximum returns. Here are some points to keep in mind:

• Compare the rates from different issuers to secure the highest rate and returns

• Estimate your returns with the help of an FD calculator to ensure you get the desired maturity amount

• Check the credibility of the issuer to keep your investment protected

• Choose cumulative FDs to leverage the compounding power and get better returns

• Avoid premature withdrawal of fd, which can lower the overall returns

• Understand the tax implications and adjust terms to lower your tax liability

Before investing in a callable fixed deposit, do your due diligence to ensure you get the desired returns. On Bajaj Markets, you can browse FDs from some of the leading banks and NBFCs. The process is simple and can be completed entirely.