Difference Between Callable And Non-callable FD And The Best One To Choose

Two forms of fixed deposits provide you with a secure way to grow your savings, i.e., callable and non-callable FDs.  When you open a fixed deposit account, it comes with a specific:

• Interest rate
• Tenure

Usually, your funds remain locked in for this tenure so you can earn at the specified rate. However, to give you an option to benefit from liquidity, callable FDs allow to withdraw funds before the tenure ends. While the major difference between a callable and a non-callable FD is the facility of withdrawing prematurely, they have other similarities and differences. 

Callable Fixed Deposit

It is the kind of deposit which allows you to withdraw your funds before completing the maturity period. 

Features:

• You can withdraw the total amount or a partial amount of your fixed deposit
• When you withdraw prematurely, financial institutions charge a penalty
• The penalty is usually in the form of lower interest rates, affecting your payout

• Pros and Cons

Pros

Cons

During emergencies, your fixed deposit gives you access to funds for instant liquidity It is an affordable option as it doesn’t have a high minimum requirement to start your investmentYou can withdraw 80-90% of your deposit amount, depending on the financial institutionIt allows you to choose the auto-renewal option so you can stay invested for future financial security You can use the investment to take a loan to finance urgent needs while continuing to earn interest

If you withdraw before the maturity date, a specific penalty is chargedIt offers a lower rate of interest as compared to a non-callable FD

Also Read: Latest Post Office FD Interest Rates

Non-Callable Fixed Deposit

With the introduction of a non-callable fixed deposit in 2015, the RBI offers you the chance to increase your interest payout. At the same time, banks and other financial institutions can benefit from a stable source of finance for a predetermined period. 

Features:

• Non-callable FD accounts don’t allow you to withdraw money until maturity, which is usually for a period of 1 to 2 years. 
• You are required to invest at least ₹1 crore to start your investment and can go up to ₹5 crores 
• Withdrawal of your funds is only allowed in these exceptional cases: 

• Demise of the depositor 
• Bankruptcy
• Court order 
• Liquidation of the business

• Pros and Cons

Pros	Cons
The interest rate is high as your lump sum investment is locked in for the tenure You can take a loan against your FD to finance urgent needs	You cannot access your investment until maturity, which makes it difficult to address emergencies The minimum amount to start your investment is highYou have less flexibility in choosing your maturity date You cannot utilise the auto-renewal option

Callable vs Non-Callable FDs: Which One to Select?

Both Indian residents and NRIs can choose to invest in these FDs. Your choice will depend on certain factors like:

• Your need for liquidity: If you want to access funds instantly in case of emergencies, go for a callable FD
• Your current savings: If you have an emergency fund or sufficient savings that you can access with ease, go for a non-callable FD for higher interest gains 
• Your goals: If you need to save a substantial amount for a specific life goal, such as buying a home, choose a non-callable FD 

Now, you can choose the right kind of FD to save for your future. No matter which one you choose, staying invested helps you enjoy higher payouts. If you need funds to bridge gaps and upgrade your life, look no further than Fibe. 

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FAQs on Callable and Non-Callable Deposit

Are the interest rates higher for non-callable FDs compared to callable FDs?

Yes, interest rates are higher in the case of non-callable deposits. This is because of the fact that you cannot withdraw the investment partially or completely before maturity. 

Do callable FDs offer the same flexibility as non-callable FDs?

Callable, meaning FDs that you can withdraw prematurely, offer you more flexibility since you can access your funds when you need them. However, this does come with certain interest penalties. 

Which type of FD is better for long-term investments: callable or non-callable?

Non-callable FDs have a maturity period of between 1-2 years. Hence, callable fixed deposits can be a good choice for the long term as they come with longer tenures. 

What is the interest rate for callable FD?

The interest rate varies between 2.75% to 8.60% or more, depending on the financial institution. Check and compare the rates before you invest for higher returns. 

Can we take a loan on a non-callable FD?

Your deposit can act as security, depending on the financial institution’s terms and conditions. You can usually take a loan against non-callable fixed deposits. 

Can we break non-callable FDs?

In most cases, you cannot prematurely withdraw your investment. However, you can do so in certain cases related to bankruptcy, death of the depositor, court order, and more.