What is a Callable Fixed Deposit?

A callable FD is a type of fixed deposit account that allows investors to withdraw a portion or the entirety of the deposited sum prior to the set maturity date. In other words, all normal fixed deposit accounts that permit premature withdrawals can be categorised as callable FDs. However, most banks and NBFCs allow premature withdrawals against a penalty charge. This penalty usually ranges from 0.5%-1% and is charged on the bank or NBFC FD interest rate, resulting in slightly lower yields from the account.

Key highlights

Here’s a run-through of the key highlights on callable fixed deposits:

• A callable FD is a type of fixed deposit account that allows partial and whole premature withdrawals before the end of the maturity term.
• The RBI introduced non-callable fixed deposits in 2015 with higher interest rates and a predetermined lock-in period.
• A non-callable FD is one that does not allow premature withdrawals or account closures before the maturity date.
• The minimum investment amount for non-callable FDs was Rs. 15 lakh — significantly higher than callable fixed deposits. The RBI raised this minimum deposit requirement to Rs. 1 crore in October 2023.
• Non-callable FDs generally offer higher interest rates. However, you lose out on the liquidity benefits of the investment with the mandatory lock-in mandate.

Features and benefits of a callable fixed deposit

1. Emergency Liquidity Access
   Withdraw funds prematurely during emergencies, helping you avoid high-interest credit options.

2. Flexible Investment Tenure
   Choose terms from as short as 7 days to as long as 10 years, based on your goals.

3. Custom Investment Amounts
   Deposit as much as you prefer, making it easy to align with your budget.

4. Low Entry Barrier
   Start investing with as little as ₹1,000, making it accessible for all investor types.

5. Partial Withdrawals Allowed
   Some banks allow breaking part of the FD, ensuring better cash flow control.

6. Safe and Predictable Returns
   Offers steady returns with minimal market-linked risk.

7. Ideal for Short-Term Planning
   Suitable for savers who value flexibility over the highest possible interest rates.

Calculate FD interest rate using FD Calculator

Conclusion

Considering your investment goals, time horizon, and liquidity needs is paramount before choosing between callable and non-callable FDs. While non-callable FDs bring you higher interest earnings, the high minimum deposit requirement of these deposits might make them impractical for average investors. Additionally, most investors can earn better returns by investing this amount in market instruments instead of a non-callable fixed deposit account.

Callable FDs, on the other hand, are well-suited for risk-averse retail investors looking for safe investments, monthly income, or retirement planning options with the possibility of early withdrawals. The only drawback of these FD accounts relates to the relatively lower interest rates. However, you can easily tackle this issue by investing in a high-interest-paying corporate FD. For instance, you can grow your funds with a Bajaj Finance FD that offers interest rates of up to 7.30% p.a. Certified with the highest [ICRA]AAA(Stable) and CRISIL AAA/STABLE stability ratings, a Bajaj Finance FD ensures that your deposits are completely secured.

Calculate your expected investment returns with the help of our investment calculators