FD Withdrawal Rules Amended: You Can Now Prematurely Withdraw Upto Rs 1 Cr

3 min read • Updated 6 December 2023
Written by Anshul Gupta

The Reserve Bank of India released a circular on 26th October 2023 stating that all fixed deposits made upto Rs 1 crore can be prematurely withdrawn. This benefit will be available for NRE/NRO term deposits as well.

What does this mean? You can withdraw all your fixed deposits up to Rs 1 crore. Before the release of this circular, the withdrawal limit was upto Rs 15 lakh. This means all FDs upto Rs 15 lakh were callable, and the bifurcation of callable vs non-callable happened for deposits above 15 lakhs.

It looks like we will be using the terms callable and non-callable deposit quite a few times in this article, so let’s understand what the terms mean.

Callable vs Non- Callable Deposit

A callable fixed deposit is where the FD amount can be withdrawn wholly or partially before maturity. All fixed deposits that allow premature withdrawal are called callable fixed deposits.

A non-callable fixed deposit is a scheme where you cannot withdraw the invested amount before maturity. Your investment remains locked in for your chosen tenure. Banks offer higher rates on non-callable FDs to discourage premature withdrawals.

Difference Between Callable and Non-Callable Deposit: A Table

FeatureCallable DepositNon-Callable Deposit
DefinitionA callable deposit is a fixed deposit where the deposit amount can be withdrawn before the maturity date.A non-callable deposit is a fixed deposit where the deposit amount cannot be withdrawn before the maturity date.
Premature withdrawalCallable deposits typically allow for premature withdrawal, subject to penalties.Non-callable deposits do not allow for premature withdrawal except in certain circumstances, such as death or bankruptcy.
Interest ratesCallable deposits typically offer lower interest rates than non-callable deposits, as the bank can redeem the deposit early.Non-callable deposits typically offer higher interest rates than callable deposits, as the bank is committed to keeping the deposit until the maturity date.
LiquidityCallable deposits are generally more liquid than non-callable deposits, as they can be redeemed early.Non-callable deposits are generally less liquid than callable deposits, as they cannot be redeemed early.
RiskCallable deposits are considered less risky than non-callable deposits, as investors can withdraw the deposit early if interest rates decline.Non-callable deposits are considered more risky than callable deposits, as the investors must keep the deposit until maturity, even if interest rates rise.

What Does This Rule Mean for You?

This rule change will allow you to withdraw fixed deposits prematurely, upto Rs 1 crore. You can now benefit from rising interest rates by closing your FDs prematurely and reinvesting at higher rates. However, banks may no longer offer the extra interest they used to offer on FDs of less than Rs 1 crore.

FAQs

What are the advantages of a callable fixed deposit?

– The most significant advantage of callable fixed deposit (FD) schemes is the high liquidity that lets individuals withdraw money from their FD anytime.

– The minimum deposit amount for callable FDs is lower than tor the non-callable FDs.

What are the advantages of non-callable fixed deposits?

Non-callable fixed deposit schemes offer higher interest rates on the deposit amount than callable fixed deposits.

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Anshul Gupta

Co-Founder
IIT Roorkee Alumnus and CFA with experience of structuring debt products worth more than 15000Cr for institutional and retail investors.

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