Fixed Deposit is considered a safe investment medium in the country as it offers guaranteed returns. At present, RBI has announced a change in a rule related to this, which will benefit investors.
The Reserve Bank of India (RBI) has changed a rule regarding premature withdrawal of money from bank fixed deposits. Till now banks provide premature withdrawal facility on FD up to Rs 15 lakh. Now the Central Bank has increased this amount to Rs 1 crore with immediate effect. This means that now if money is needed, the FD can be broken before maturity and investors will be able to withdraw their deposits.
Two types of FD
Banks offer two types of FDs, which include callable and non-callable. Non-callable FD means that you cannot withdraw money before time i.e. before the FD matures. But this can be done in callable FD. In callable FD, the account holder can withdraw some or the entire amount before maturity. Although banks charge some penalty for withdrawing money before maturity, there is no lock-in period in callable FD. But non-callable FD gets more interest than normal FD because the money is blocked in it.
What changed?
RBI had said in a circular on October 26, 2023 that the minimum amount that can be withdrawn prematurely for non-callable FD is being increased from Rs 15 lakh to Rs 1 crore, which means Rs 1 crore and less. All domestic term deposits of this amount will have the facility of premature withdrawal. It has been said in the circular that these instructions will also be applicable to NRE deposits and NRO deposits. This circular is applicable to all commercial banks and co-operative banks.
According to the circular, ‘Banks will have the freedom to offer NRE/NRO fixed deposits without premature withdrawal option. But for amounts of Rs 1 crore and less, all NRE/NRO fixed deposits accepted from individuals will have to provide the facility of premature withdrawal.
After RBI continuously increasing interest rates from May 2022, banks are now offering attractive interest rates on FD to investors. Earlier this month, RBI Governor Shaktikanta Das had said that there is still scope for further increase in deposit and loan rates.
