June 17, 2025
8 mins read
Fixed Deposits (FDs) are among the Replace with “commonly used investment products in India, with fixed returns with a high degree of capital protection, subject to bank terms and applicable regulations.. Among the various types of FDs, there are two main types — callable & non-callable FDs. The major variation is in the withdrawal facilities before the maturity date. Callable FDs permit early withdrawal, while non-callable FDs do not. The two types serve to meet various liquidity requirements and investors' interest rate expectations.
It is essential to understand the difference between callable and non-callable FDs prior to opting for the appropriate one. Callable FDs offer the option of premature withdrawal, subject to applicable penalties. but tend to have slightly lower interest rates. However, non-callable FDs may offer relatively higher interest rates, depending on bank policy since they are locked in. This article is meant to assist investors in determining the correct type of FD depending on individual financial objectives and liquidity needs.
A callable fixed deposit is one form of term deposit in which the investor has the choice to withdraw money ahead of the term of maturity. This aspect is ideal for individuals who might need quick access to investment in case of unexpected circumstances. Banks permit this withdrawal by implementing a penalty or revised interest rate, as specified by the bank. or modifying the rate of interest.
Callable FDs are readily available with both private and public sector banks in India. They are generally for tenures of 7 days to 10 years. Interest rates differ depending on the bank, deposit size, and tenure. Though the rate is marginally lower than in non-callable cases, the compromise is liquidity.
This sort of FD is conducive to financial flexibility and may be a component of medium to short-term investment planning. It is critical to learn about the withdrawal terms, since the banks might limit premature closure in the initial months.
Callable FDs provide the flexibility to access your funds before maturity, which can be helpful in times of financial emergencies or unexpected expenses.
Investors can choose from a wide range of tenure options, making it easier to align with different short-term and medium-term goals.
In case of early withdrawal, banks may apply a small penalty or revise the applicable interest rate, but the option to access funds remains available.
These FDs are easily accessible through most banks and financial institutions, both online and offline.
Despite the flexibility, callable FDs offer a fixed interest rate, ensuring predictable income throughout the term.
Booking a callable FD requires minimal documentation and can be done seamlessly via net banking, mobile apps, or branch visits.
A non-callable fixed deposit cannot be withdrawn prematurely in normal times. The money gets invested once and stays locked until the maturity of the selected tenure. It is a good choice for those who do not need liquidity but wish to avail themselves of higher interest rates.
Non-callable FDs are often come with higher minimum investment requirements, subject to bank-specific terms and above. They are designed to give better interest rates than callable deposits. As the banks are guaranteed to keep the money with them for a set period of time, they provide marginally higher returns.
Whereas the non-callability restricts flexibility, it may motivate disciplined investment. It is particularly apt for long-term financial objectives where liquidity is not imperative. Banks might provide exceptions under certain circumstances, like the death of the depositor, but this differs.
Non-callable FDs offer slightly better returns than callable options due to the absence of premature withdrawal.
Since the amount remains locked in, it encourages a more disciplined investment approach aligned with long-term objectives.
Usually starts from ₹15 lakh, making them suitable for high-value investors looking for better-fixed returns.
Helps secure consistent interest income throughout the chosen tenure without interruptions or changes.
Best suited for long-term goals where you do not need immediate access to the funds.
The inability to withdraw early ensures that the funds remain intact and committed to their intended purpose.
Feature | Callable FD | Non-Callable FD |
Premature Withdrawal | Allowed with a penalty or reduced interest rate | Not allowed under normal circumstances |
Liquidity | High, due to the flexibility of early withdrawal | Low, as funds remain locked until maturity |
Interest Rates | Slightly lower due to the withdrawal option | Slightly higher due to fixed tenure and no early exit |
Minimum Investment | No fixed minimum, varies across banks | Often starts from ₹15 lakh or more |
Flexibility | Offers flexibility for changing plans | Locked-in discourages unplanned withdrawals |
Investor Type | Suitable for those needing access to funds on short notice | Ideal for those focused on earning better returns without liquidity needs |
Penalty Charges | Applicable on early exit, based on tenure and amount | Not applicable as early withdrawal is generally disallowed |
Availability | Widely offered by banks across tenure ranges | availability may depend on deposit size and bank eligibility criteria based on higher deposit requirements |
Choose callable FDs if you might need funds early.
Non-callable FDs typically require a higher deposit.
Non-callable FDs offer slightly higher returns.
Callable FDs are suitable for those who want flexibility.
Long-term goals with no liquidity requirement suit non-callable FDs.
Review bank-specific terms for withdrawal, penalties, and tenure.
Here’s a step-by-step guide that will help in making an informed decision while choosing one:
Identify if you may need to withdraw funds before the deposit matures. If yes, callable FDs are more suitable.
Ensure you meet the bank’s minimum investment criteria for non-callable FDs, which is usually higher.
Evaluate the interest rate difference between the FD types and see what fits your return expectations.
Review the specific withdrawal rules and penalties imposed by your bank for callable FDs.
Align the FD tenure with your financial plan—shorter durations for callable FDs and longer for non-callable.
Always go through the terms and conditions, especially clauses related to early withdrawal and penalties.
If neither suits your needs, consider recurring deposits or debt mutual funds based on your financial goals.
Both callable and non-callable FDs serve different investment needs. While callable fixed deposits provide liquidity and flexibility, non-callable fixed deposits cater to investors seeking better returns without early withdrawal options. The choice depends on your financial objectives, required liquidity, and investment horizon. Always compare offerings across banks before locking in your funds.
FD terms, rates, and withdrawal conditions vary across banks and are subject to prevailing regulations
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Callable fixed deposits allow investors to withdraw funds before maturity with applicable penalties. In contrast, non-callable fixed deposits do not permit premature withdrawal under normal circumstances, making them less flexible but often better in terms of fixed returns.
Callable FDs are better for those who prioritize access to funds and may need them in emergencies. Non-callable FDs suit investors who can commit funds for a fixed term in exchange for relatively better interest rates and lower liquidity.
Generally, non-callable FDs do not allow premature withdrawal. However, exceptions might be made in rare scenarios such as the death of the depositor. These conditions vary by bank and should be confirmed before investing.
Yes, banks usually offer slightly higher interest rates on non-callable FDs as compensation for the lack of liquidity. Since the funds remain locked until maturity, banks reward investors with marginally better returns.
The primary risk is reduced flexibility, as funds cannot be withdrawn before maturity. This can be challenging during unexpected financial needs. Additionally, locking in funds for the long term may impact liquidity if circumstances change.
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