RBI: Money can be withdrawn from FD of up to Rs 1 crore

The Reserve Bank has given good news to those making fixed deposits in the bank. RBI has changed some rules related to pre-mature withdrawal of FD. The limit of threshold for Non-Callable Term Deposit has been raised from Rs 15 lakh to Rs 1 crore.

With this, those investing in FD will get more liquidity. So, how will you benefit from this decision of RBI? To know this, it is important to first understand Callable and Non-Callable FD. Let us know about them.

Banks generally offer two types of term fixed deposits, first is callable deposit and second is non-callable FD.

All such FDs which provide the facility to withdraw money before maturity are called callable FDs. Banks can charge some amount as penalty for withdrawing money before maturity. Most FDs are generally callable FDs. Non-callable fixed deposits are those which you cannot withdraw money before the maturity date. By investing in it, your money gets locked for the entire tenure. In such a situation, you can withdraw money only when the FD matures.

The Reserve Bank has increased the limit of non-callable FD from Rs 15 lakh to Rs 1 crore. This means that all non-callable FDs with an amount of Rs 1 crore or less will have the facility of pre-mature withdrawal. These instructions have come into effect with immediate effect at all commercial banks and co-operative banks.

Non-callable FD gives higher interest than normal FD. This is because your money remains blocked for a certain period of time.

According to the website of State Bank of India, the interest on normal i.e. callable FD of 1 to 2 years is 6.80 percent, whereas the best non-callable FD is getting 7.10 percent interest on the tenure of 1 year. Which is 30 basis points more than normal FD.

Similarly, the interest on two-year non-callable FD is 7.40 percent. This is 40 basis points more than the 7 percent interest on a normal FD of 2 to 3 years. To get higher interest, at present you will have to deposit above Rs 15 lakh and up to Rs 2 crore. Fixed deposits are popular among people because of the fixed interest rate and security of money. However, its another advantage is liquidity, that is, your money is easily available when needed.

In callable FD, you get the advantage that in case of medical emergency, job loss or any other emergency, you can redeem the FD. But this is not the case with non-callable FD. However, after the latest decision of RBI.

Now if your non-callable FD is of Rs 1 crore or less, then, you will get the option of pre-mature withdrawal. This way, both callable and non-callable FDs up to Rs 1 crore will be able to withdraw money before time.

Availability of pre-maturity facility in non-callable FD up to Rs 1 crore is a news of relief. Despite this, the minimum deposit amount in it is much higher than Callable FD. At present, in some banks like SBI, PNB and Bank of Baroda. For a non-callable FD, you have to deposit at least Rs 15 lakh whereas you can open a callable FD for Rs 5-10 thousand or even less.

It does not seem wise to deposit huge amount of money in non-callable FD for just a little more interest. In such a situation, for higher returns, you can invest in callable FD of small banks or FD of AAA rated company.

These can give you more interest than non-callable FDs of big banks and the minimum deposit amount is also less.