Non-callable vs normal FDs. How are they different? Features, benefits and limitations
Minimum and Maximum Deposit: Earlier, the minimum deposit to initiate a non-callable fixed deposit was ₹15 lakh, but in October 2023, the RBI raised the minimum amount for offering non-callable Term Deposits (TDs) 6.66 times to ₹1 crore to ensure that retail depositors don’t get lured by additional interest rates. The maximum deposit limit for non-callable fixed deposits is ₹5 crore. But for NREs, deposits should be below Rs.
2 crore. Eligibility: The scheme extends its eligibility to residents and non-residents, accommodating a broad range of potential investors. Maturity Period: The maturity period is between one and two years of the investment.
Auto-Renewal Facility: There is no provision for automatic renewal in this scheme. Loan Against FD: The non-callable fixed deposits can be used as collateral for fund-based and non-fund-based loans, contingent on the established criteria. Higher interest rates: Non-callable fixed deposits offer more attractive interest rates on the principal deposit.
Stable Funding Source: Non-callable fixed deposits provide a stable, reliable source of funding for banks, allowing them to hold the funds until the maturity date. Enhanced Asset Liability Management: Non-callable fixed deposits contribute to a well-established and effective asset-liability management system for banks. While the non-callable deposits come with impressive advantages, it has some limitations also: Limited Liquidity: Non-callable deposits lack liquidity.
Under emergencies where we might be in dire need of the money, it is blocked. High Minimum Deposit: The minimum amount of deposits is very high, thus limiting this opportunity only to a restricted class of people. Funds are Locked In: Depositors' funds are locked in
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