In a bid to earn a higher rate of interest, depositors can avail the option of opening a non-callable fixed deposits (FDs). Unlike callable fixed deposits, these term deposits come with a strict lock-in period.
Once you invest a sum into these deposits, you have to wait for the expiry of the time period for which the deposit was made.
For instance, when Mr Rajesh Arora opens a non-callable fixed deposit amounting to ₹15 lakh for five years, he is entitled to receive a higher rate of interest but he won’t be allowed to withdraw this sum during this period.
The only exceptions in which withdrawals are allowed include bankruptcy, death, winding up of business, among others
Banks incentivise the depositors by offering a higher rate of interest.
What are non-callable fixed deposits?
Non-callable fixed deposits refer to a category of fixed deposit (FD) that cannot be prematurely withdrawn by the depositor before the completion of term.
Once you make an investment in these deposits, the funds are locked in for the specified duration, and depositors are not given access until the maturity of the FD.
Let us take a look at some of the banks and their rates of interest on non-callable deposits:
| Bank | Rate of interest (for one year) |
| ICICI Bank | 7.35% (for ₹2-5 crore) |
| HDFC Bank | 7.35% (for one ₹2-5 crore) |
| State Bank of India (SBI) | 7.10% (for ₹15 lakh to ₹2 crore) |
| Bank of Baroda | 7% (for ₹15.01 lakh to ₹2 crore) |
Advantages of non-callable deposits:
1. One of the key advantages is that depositors tend to earn a higher rate of interest.
2. Since the amount is locked, one can lock the deposits at a higher rate without worrying over the fall in rates at a later stage.
3. By investing in non-callable deposits, one gets a sense of investing discipline. The scope of withdrawal keeps deposits vulnerable to loss of interest.
Disadvantages
1. Since these deposits have a lock-in period, one can’t use the money even if there is some emergency such as job loss, etc.
2. When there is an opportunity of earning a higher return from equity because of the radical change in market movement, one can feel helpless when money is locked in a fixed income instrument, especially when the amount is large.
3. These options are usually given for bigger amounts.
